Summary of Jiangsu Hengli Hydraulic Co. Ltd. Conference Call Company Overview - **Company**: Jiangsu Hengli Hydraulic Co. Ltd - **Industry**: China Industrials - **Stock Rating**: Overweight - **Price Target**: Rmb133.00 - **Current Price (as of March 31, 2026)**: Rmb96.00 - **Market Capitalization**: Rmb128,719 million - **Fiscal Year Ending**: December 24 Key Takeaways Industry and Market Performance - **Revenue Growth**: 2026 started strong with over 30% year-over-year (YoY) revenue growth in Q1, with excavator hydraulics up over 40% YoY [7] - **Future Projections**: Expected 20-30% YoY topline growth in the coming years, driven by overseas expansion, and over 30% YoY net profit growth [7] - **Non-Excavator Products**: Targeting 20% YoY growth, with pumps and valves projected to reach Rmb10 billion in sales within 3-4 years, with 40% of sales from overseas [7] Overseas Expansion - **Market Share**: Hengli is gaining overseas market share, piloting products with global clients like Hitachi, Volvo, and Doosan [2] - **Humanoid Robots**: Shipping screws to a key US client at a rate of 400 sets per month, expected to ramp up to 1,000 sets per week by July. Each robot is valued at approximately Rmb10,000 [2] - **Mexico Plant**: Set to start operations by April or May 2026, with production costs similar to domestic levels [2] Financial Metrics - **Earnings Per Share (EPS)**: Projected EPS of Rmb1.87 for 2024, increasing to Rmb3.35 by 2027 [4] - **Revenue Projections**: Expected net revenue of Rmb9,390 million in 2024, growing to Rmb16,585 million by 2027 [4] - **EBITDA**: Projected EBITDA of Rmb2,821 million in 2024, increasing to Rmb5,153 million by 2027 [4] Risks and Opportunities - **Upside Risks**: Stronger-than-expected demand for excavators and pumps & valves, notable penetration into foreign brands' supply chains, and faster humanoid robot market penetration [10] - **Downside Risks**: Potential decline in excavator and pumps & valves demand in China, failure to expand in non-excavator parts, and slower-than-expected humanoid robot penetration [10] Valuation Methodology - **Valuation Approach**: Price target derived by applying a 35x P/E for core business and DCF for humanoid robot parts business, resulting in a combined target price of Rmb133 [8] Additional Insights - **Sales Breakdown**: Europe accounts for 50% of sales, which doubled in 2025 to approximately Rmb1 billion, with plans to double again in 2026. Current market share in Europe is under 10% [7] - **US Market Potential**: US revenue could match Europe’s level within 1-2 years, currently accounting for 25% of sales [7] - **Asia Market**: Primarily Japan, also contributing 25% to sales [7] This summary encapsulates the key points from the conference call regarding Jiangsu Hengli Hydraulic Co. Ltd, highlighting its growth trajectory, market strategies, financial outlook, and associated risks.

INVESTOR DAY M A R C H 2 0 , 2 0 2 6 THE CORE 2030 STRATEGY Powering Progress at the Heart of Motion & Control N Y S E : H L I O AGENDA & BACKGROUND TANIA ALMOND Vice President, Investor Relations & Corporate Communication 2 SAFE HARBOR This presentation and oral statements made by management in connection herewith contain "forward‐looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward‐looking statements involve risks and uncertainties, and actual results may d ...

Summary of Jiangsu Hengli Hydraulic Co. (601100.SS) Conference Call Company Overview - **Company**: Jiangsu Hengli Hydraulic Co. - **Industry**: Hydraulic components and systems for mobile machinery and general industrial applications Key Points and Arguments Business Momentum - Strong momentum observed across various product segments and verticals, including: - Potential order increase of approximately 10 times for humanoid robotics components from overseas customers expected in the second half of 2026 [1] - Accelerated applications in general industrials for linear actuators and ball screws, with significant price discounts compared to multinational peers largely removed [1] - New revenue streams anticipated from brain-computer interface products and commercial aerospace [1] - Robust performance in traditional hydraulics business driven by both direct and indirect exports [1] Humanoid Robotics - Management expects revenue from humanoid robotics to exceed core business revenue within 3 to 5 years [10] - Initial US customer orders received post-Chinese New Year, with volume in the low thousands of units, indicating a revenue potential of over RMB 100 million for 2026 [10] - Plans to move downstream to full joint assemblies, which would significantly increase the value captured per robot [10] - Construction of a new capacity facility in Mexico for humanoid robot components expected to be operational by April-May 2026 [10] Financial Projections - Management anticipates revenue growth to reach RMB 300-500 million with tens of millions in profit generation, prioritizing delivery execution over aggressive expansion [10] - Revenue expected to double annually over the next two years [10] - Customer shipment guidance for 2026 is between 7,000 to 10,000 units, with an estimated average selling price (ASP) of approximately RMB 10,000, contributing around RMB 100 million in revenue [16] Traditional Hydraulics Business - Domestic excavator demand has shown modest recovery since 2025, while overseas demand rebounded strongly from the second quarter of 2025 [16] - Management expects non-excavator demand to improve from March, projecting year-on-year growth [14] - Monthly shipment volume expected to grow by over 50% year-on-year, with revenue growth projected at over 40% [16] Capital Expenditure and Cash Flow - Limited capital expenditure required for traditional business, with planned overseas investments in Indonesia and Brazil amounting to a few hundred million RMB [17] - Significant future capital expenditure anticipated for humanoid robotics products, contingent on order conversion [17] Risks and Valuation - Key risks include fluctuations in global demand for mobile machinery, product development timelines, and the global trade environment [20] - Current price target set at RMB 83.00, reflecting a downside of 22.4% from the current price of RMB 106.97 [21] - Valuation based on a discounted P/E methodology, with an exit P/E multiple of 30x on 2030E EPS [19] Additional Insights - Management highlighted the potential for electric cylinders to improve gross profit margins, historically around 40% [16] - The company is positioned as a sole supplier for leading domestic companies in the commercial aerospace sector [16] - Engagement with key overseas customers is ongoing, with expectations for domestic customers to contribute significantly to sales first [16] This summary encapsulates the key insights from the conference call, focusing on the company's growth prospects, financial expectations, and strategic initiatives within the hydraulic components industry.

Financial Data and Key Metrics Changes - The company reported a 13% increase in sales year-over-year, reaching $220 million, exceeding the guidance range of $215 million [14][22] - Adjusted EBITDA margin was above 20%, marking a significant recovery [5][11] - Gross profit increased by 21% year-over-year to $73 million, with gross margin expanding by 200 basis points to 33.1% [15][19] - Diluted EPS was $0.31, down 9% year-over-year, while diluted non-GAAP EPS was $0.72, up 22% [16][19] Business Segment Data and Key Metrics Changes - The electronics segment grew by 21% year-over-year, driven by strong performance in the recreational and industrial markets [14][18] - Hydraulics sales increased by 9% year-over-year, supported by improving demand in mobile and agriculture markets [17][19] - The electronics segment's gross profit and gross margin expanded by 38% and 420 basis points, respectively [18] Market Data and Key Metrics Changes - Year-over-year sales increased double digits across all three regions, with APAC growing by 10% and the Americas by 6% [14][15] - EMEA experienced a typical seasonal decline of 6% [14] - The mobile, recreational, and agriculture markets showed signs of recovery compared to year-over-year comparables [14][15] Company Strategy and Development Direction - The company is focused on organic growth driven by innovation and has launched new products that provide incremental sales streams [24][25] - A restructuring initiative is in place to streamline operations and optimize the portfolio [10][21] - The company aims to reduce its leverage ratio to around two times by year-end, allowing for strategic investments in 2026 [11][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 with growth, citing improved demand trends and healthier dealer inventory levels [21][68] - The company anticipates fourth-quarter sales in the range of $192-$202 million, representing a 10% increase year-over-year [22] - Management highlighted the importance of volume growth to achieve mid-20s EBITDA margins in the future [34][36] Other Important Information - The company closed the sale of Custom Fluidpower, recording a gain of $21 million, while also writing down $25.9 million of goodwill related to i3 Product Development [9][10] - The company is committed to maintaining its long dividend history and opportunistically repurchasing shares [11][24] Q&A Session Summary Question: Can you provide insight into recent commercial wins and visibility into 2026? - Management highlighted recent wins in various sectors, including agriculture and recreational markets, indicating a positive outlook for 2026 [30][31] Question: What will it take to return to adjusted EBITDA levels seen in fiscal 2021? - Management noted that increased volume and effective cost management are crucial for achieving mid-20s EBITDA margins [34][36] Question: What is the current state of the recreational vehicle market? - Management indicated that while retail demand has not rebounded, dealer inventory levels are healthier, which is a positive sign for future growth [44][46] Question: Is there any further portfolio reshaping planned? - Management stated that there are no imminent changes but emphasized ongoing evaluations of the portfolio [48][50] Question: What are the plans for the i3 Product Development operation? - Management clarified that the focus is on integrating talented engineers into the broader Helios portfolio rather than pursuing standalone projects [74][76]

Financial Data and Key Metrics Changes - Sales for the second quarter were $212 million, exceeding the outlook of $206 million, with foreign exchange contributing approximately $3 million to this overachievement [11][19] - Adjusted EBITDA margin was 18.6%, above expectations, despite being impacted by unfavorable product mix and tariff effects [11][12] - Cash from operations reached near-record levels of $37 million, marking a 10% improvement over the previous year [11][26] - Net debt decreased by $67 million year-over-year, improving the net debt to adjusted EBITDA leverage ratio to 2.6 times [12][28] Business Line Data and Key Metrics Changes - Hydraulic sales declined by 3% year-over-year, reflecting weakness in industrial and mobile end markets, although agriculture showed signs of stabilization [23] - Electronics segment sales were down 4% year-over-year, with significant declines in the recreational market [24] - Hydraulics gross profit and gross margin grew by 4% and 220 basis points year-over-year, respectively, due to lower material and direct labor costs [23] - Electronics gross profit declined by 18%, with a 530 basis point drop in gross margin primarily due to higher freight and duties costs [24] Market Data and Key Metrics Changes - EMEA region sales grew by 5% year-over-year, while sales in The Americas and APAC declined [20] - APAC electronics segment sales increased by 27% year-over-year, driven by the health and wellness end market [20] - The overall sales comparables remain negative year-over-year, but profitability improved sequentially with increased sales volume [20] Company Strategy and Development Direction - The company is refocusing its go-to-market strategy and prioritizing capital allocation to improve return on invested capital (ROIC) [12][14] - A definitive agreement was signed to sell Custom Fluid Power for approximately $54 million, which is expected to improve margin rates within the Hydraulics segment [12][14] - The company aims to achieve a sub-two times leverage ratio to enhance capital allocation flexibility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery in various markets, including agriculture and health and wellness, with expectations for growth in the second half of the year [31][34] - The company anticipates third-quarter sales in the range of $208 million to $215 million, representing a potential 9% increase year-over-year [35] - Management acknowledged ongoing external challenges, including tariff changes and stagnant interest rates, but remains focused on long-term growth prospects [34][39] Other Important Information - The company has made significant progress in cash management, achieving a trailing twelve months free cash flow conversion rate of 291% [26] - The strategic divestiture of Custom Fluid Power is expected to provide greater flexibility for capital deployment decisions [39] - The company is committed to improving margins across all business lines and evaluating opportunities within its product portfolio [40] Q&A Session Summary Question: Market Inflections and Customer Engagement - Management noted growth in health and wellness and signs of recovery in agriculture, with expectations for all main businesses to grow in the second half of the year [46][48] Question: Non-Core Business Considerations - The divestiture of Custom Fluid Power was strategic, as it did not align with the core business, and no immediate non-core divestitures are planned [50][53] Question: Margin Expectations for the Second Half - Management did not provide specific segment margin guidance but indicated expectations for revenue growth in hydraulics and electronics, with potential margin uplift [62][64] Question: Competitive Positioning in the US - The company highlighted its competitive advantage due to its US manufacturing footprint, which allows for better pricing strategies and differentiation in the market [77][80] Question: Organizational Structure Changes - Management is focused on restructuring to improve efficiency and has made progress in aligning teams with brand and product focus [84][86] Question: Update on Water Guru Partnership - The partnership is expected to ramp up, with initial product launches completed, but significant revenue impact is not anticipated until 2026 [96] Question: Impact of Interest Rate Changes - A reduction in interest rates would be beneficial, particularly for consumer discretionary segments, but the company is prepared to grow without relying on this [98][99]