Core Viewpoint - The company is focusing on the development of small and medium-sized gas turbines, leveraging technological breakthroughs and industrial collaboration to capture the high-end manufacturing market amid the accelerating energy transition in China [1][9]. Industry Background - The gas turbine industry is positioned to address the efficiency and flexibility challenges in energy supply, with small and medium-sized units having inherent advantages in distributed energy scenarios [2]. - The demand for distributed energy is surging in industrial parks, commercial complexes, and data centers, making traditional large gas turbines less suitable due to their high investment and long cycle times [2]. Technological Advancements - The company has adopted a "introduce-digest-innovate" localization strategy, forming a technology system that integrates collaboration with Russia and domestic research [2]. - The company has independently developed two series of gas turbines, LGT-010 (10MW) and LGT-004 (4MW), with the 10MW model already in production and filling a domestic research gap [2][7]. - The company possesses unique technology in 8-ton heavy magnetic suspension bearings, breaking foreign monopolies and reducing operational costs significantly [3]. Strategic Partnerships - The establishment of a joint venture with local capital in Leshan, Sichuan, aims to create a manufacturing base for gas turbines, with a registered capital of 620 million yuan [4][6]. - The joint venture is seen as a strategic move to expand into the southwestern market and enhance the industrial layout, focusing on resource complementarity and risk-sharing [4][6]. Market Expansion - The Leshan base will cater to the growing demand for distributed energy projects in the southwestern region, reducing logistics costs and improving service response times [6]. - The company plans to focus on the Yangtze River Delta, Pearl River Delta, and southwestern regions for domestic market expansion, while also deepening technical cooperation with Russia for international market growth [8]. Future Growth Directions - The company aims to enhance its technology in heavy-duty and green applications, particularly in the localization of heavy magnetic suspension bearings [8]. - Plans include establishing a gas turbine industrial park centered around the Leshan base, integrating research, manufacturing, and service capabilities [8]. - The company targets to apply for over 40 patents in the next three years and establish a provincial-level key laboratory [8].

Core Viewpoint - The development of gas turbines is gaining attention as the energy structure transformation accelerates, with Fuan Machinery making significant breakthroughs in the small and medium-sized gas turbine sector [1] Industry Background - The core value of gas turbines lies in addressing the efficiency and flexibility of energy supply, with small and medium-sized units having inherent advantages in distributed energy scenarios [2] - The demand for distributed energy is surging in industrial parks, commercial complexes, and data centers, making traditional large gas turbines less suitable due to their high investment and long cycles [2] Company Strategy - Fuan Machinery focuses on the small and medium-sized gas turbine market (below 50MW) since its establishment in 2017, leveraging a localized approach of "introducing, digesting, and innovating" technology [2] - The company has developed two series of gas turbines, LGT-010 (10MW) and LGT-004 (4MW), with the 10MW model already in production, filling a gap in domestic R&D [2] Competitive Advantage - The company possesses unique technology in 8-ton heavy magnetic suspension bearings, breaking foreign monopolies and reducing operational costs significantly [3] - The use of regenerative heat technology allows for flexible adjustment of heating loads, catering to various distributed energy station needs [3] Collaborative Ecosystem - Fuan Machinery has established a joint venture with local capital in Leshan, Sichuan, to create a gas turbine manufacturing base, with a registered capital of 620 million yuan [4] - The joint venture aims to complement resources, share risks, and enhance market capabilities, focusing on local manufacturing to reduce logistics costs and improve service response [4][5] Growth Directions - The company plans to focus on three growth areas: technology breakthroughs, market expansion, and ecosystem construction [6] - Future technological advancements will emphasize heavy-duty and green applications, particularly in the localization of heavy magnetic suspension bearings [6] - Market expansion will target energy-demanding regions in China and deepen international cooperation, especially with Russia [6] Long-term Vision - The company aims to establish a complete ecosystem around the Leshan base, integrating R&D, manufacturing, and talent development to enhance its competitive position in the high-end equipment manufacturing sector [6][7]

Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Views - The company reported a significant increase in net profit for the first half of 2025, with a year-on-year growth of approximately 93.35% and a 35.2% increase in Q2 2025 [1] - The growth in revenue and profit is attributed to the continued expansion in the shipbuilding industry, increased sales in the diesel engine segment, and effective cost control measures [1][3] - The company has a strong order book, with new contracts signed in the first half of 2025 amounting to 339.19 billion yuan, representing a year-on-year increase of 25.42% [1] Financial Performance - In H1 2025, the company's revenue reached 27.651 billion yuan, a year-on-year increase of 11.22%, while the net profit attributable to shareholders was 919 million yuan, up 93.35% [1] - The company's gross profit margin improved by 4.65 percentage points year-on-year in H1 2025, with a gross margin of approximately 16.49% [3] - The revenue breakdown by business segments shows that the diesel power segment generated 139.68 billion yuan, a 27.25% increase year-on-year, accounting for 50.52% of total revenue [2] Market Outlook - The shipbuilding cycle is on an upward trend, with demand for various ship types increasing, which is expected to improve the profitability of shipyards [5] - The company is well-positioned to benefit from the tight supply-demand relationship in the ship engine market, as it is a leading player in the industry [10] - The after-market service for diesel engines presents a significant growth opportunity, with the company expanding its global service network [10][11] Earnings Forecast and Valuation - The company is projected to achieve revenues of approximately 600 billion yuan, 681 billion yuan, and 757 billion yuan for 2025, 2026, and 2027, respectively, with a compound annual growth rate (CAGR) of 14% [12] - The net profit attributable to shareholders is expected to reach 21.4 billion yuan, 30.1 billion yuan, and 37.7 billion yuan for the same years, with a CAGR of 39% [12] - The estimated price-to-earnings (P/E) ratios for 2025, 2026, and 2027 are approximately 23, 16, and 13, respectively [12]