Core Viewpoint - Tongding Interconnection (002491) reported a revenue of 1.522 billion yuan for the first half of 2025, reflecting a year-on-year growth of 5.39%, but incurred a loss of 89.6 million yuan, with a non-recurring net profit of 6.7795 million yuan, down 74.9% year-on-year [1] Financial Performance - The company experienced a significant increase in operating cash flow, reaching 162 million yuan, a year-on-year growth of 100.16%, indicating strong core business capabilities [1] - The revenue from the communication cable and related manufacturing sector was 1.236 billion yuan, accounting for over 81% of total revenue, with the power cable business showing a notable increase of 47% year-on-year to 710 million yuan [1] Business Segments - The safety business segment achieved remarkable growth, with revenue reaching 120 million yuan, a year-on-year surge of 301.91%, driven by the expansion of network security products and energy storage safety systems [1] - The company has established a dual main business structure of "Optical Communication + Safety Business" [1] R&D and Industry Standards - Research and development investment amounted to 79.18 million yuan, a year-on-year increase of 54.16%, with 40 new authorized patents granted, including 11 invention patents [1] - The company participated in the formulation of 249 industry standards in the optical communication materials field, including one international standard, enhancing its technological barriers [1] Future Focus - The company plans to focus on "quality improvement and efficiency enhancement," increasing the promotion of new products such as 5G smart cabinets and data center equipment, while also pushing for the penetration of safety business in the new energy market [2]

Core Insights - Foxconn plans to collaborate with SoftBank to produce data center equipment at its former electric vehicle factory in Lordstown, Ohio, as part of the "Stargate" project aimed at advancing AI infrastructure in the U.S. [1] - SoftBank has acquired the Ohio factory, and Foxconn will continue to operate it through a joint venture established by both companies [1] - The "Stargate" project is a joint initiative involving SoftBank, OpenAI, and Oracle, announced by former President Trump, with potential investments reaching up to $500 billion [1] Company Developments - Foxconn recently agreed to sell the Ohio factory and its equipment for $375 million, although the identity of the buyer was not disclosed [1] - Preparations for the "Stargate" project began over six months ago, with key considerations being power supply, site location, and scheduling [1] - Both Foxconn and SoftBank view Ohio as a suitable location for the project due to these logistical factors [1]

Core Insights - Foxconn plans to collaborate with SoftBank to manufacture data center equipment at its electric vehicle factory in Ohio as part of the "Gateway to the Stars" initiative aimed at advancing AI infrastructure in the U.S. [1] - SoftBank has acquired the Ohio facility, and Foxconn will continue to operate it through a joint venture formed by both companies [1] - The "Gateway to the Stars" project is a joint venture involving SoftBank, OpenAI, and Oracle, with an investment commitment of up to $500 billion announced by former President Trump [1] - Foxconn's Chairman Liu Yangwei indicated that preparations for the project began over six months ago, emphasizing the importance of power supply, site selection, and timing [1] Company Developments - Foxconn has reached an agreement to sell the Ohio factory and its equipment for $375 million, although the buyer's identity was not disclosed at that time [1] - The decision to locate the project in Ohio was based on a comprehensive evaluation of factors such as power supply and site suitability, which both Foxconn and SoftBank agreed upon [1]

Group 1: Financial Performance - In Q1 2025, the company's revenue increased by 13.51% year-on-year, driven by growth in both the data center and new energy sectors [1] - The net profit attributable to shareholders decreased by 10.44% year-on-year due to low gross margins in the new energy sector, impacted by intense competition and lower product prices [1] - Future recovery in gross margins is anticipated with the resurgence of overseas energy storage demand [1] Group 2: Market Outlook - The global renewable energy market is expected to grow, with emerging markets in the Middle East, Southeast Asia, and Africa showing sustained demand [2] - The previously competitive European market is gradually recovering after inventory depletion [2] - The company maintains an optimistic outlook on the global renewable energy market and is actively expanding new market channel development [2] Group 3: Production and Capacity - The company operates 5 automated production lines for lead-acid batteries, with an annual production capacity of 3 million kVAh to meet current demand [2] - The company offers two sales models for UPS: one with only the UPS head and another bundled with lead-acid batteries, allowing for customization based on customer needs [2] Group 4: Data Center Business - The internet industry's increased investment in data centers is expected to accelerate growth, although project timelines can be lengthy due to various stages of development [2] - The company has seen a year-on-year increase in data center business growth in Q1 and remains optimistic about the overall industry benefiting from AI development in the next three to five years [2] Group 5: Investor Relations - The company conducted the investor relations activity in compliance with information disclosure regulations, ensuring the accuracy and completeness of the information shared [2]

Investment Rating - The report maintains a "Buy" rating on Nari Tech and other domestic China opportunities, while downgrading Sungrow to "Neutral" [3][24]. Core Views - The report indicates a preference for domestic China opportunities, particularly in the grid technology sector, with a strong outlook for 2025E grid investment [2][3]. - The overall sector results for 1Q25 were largely in-line, with a median revenue change of -0% and net profit change of -6% compared to Goldman Sachs estimates [1][10]. - The report revises target prices by -14% to +13% based on 1Q25 results and forward-looking trends, rolling over the valuation base year to 2026E [1][43]. Summary by Sections 1Q25 Results Summary - 1Q25 sector results were largely in-line with 14 companies missing earnings, 13 in-line, and 5 beating expectations [1][10]. - The median gross profit margin (GPM), operating profit margin (OPM), and net profit margin (NPM) were -0.9pp, -1.7pp, and -0.5pp compared to Goldman Sachs estimates [11]. Demand Outlook - The report expects a weaker demand outlook for industrial automation in 2H25, lowering the growth expectation from flat to -4% year-on-year due to tariff impacts and uncertainties [12][16]. - Despite the challenges, a deep decline in demand is not anticipated, with government policies potentially providing support [14][20]. Domestic Opportunities - Nari Tech is highlighted as a preferred investment due to its strong growth guidance of 12% year-on-year for 2025, attributed to a robust backlog and favorable market conditions [24][46]. - The report emphasizes the potential benefits from government stimulus and the structural needs for smart grid investments in China [3][25]. AI Beneficiaries - The report continues to favor AI beneficiaries, particularly in the AI Data Centre (AIDC) space, with companies like Kstar and Envicool rated as "Buy" due to strong demand growth [2][34]. - The humanoid robot sector is also noted for its rapid R&D advancements, with companies like Sanhua being preferred for their product certainty and reasonable valuations [38][39]. Target Price Revisions - Target prices for the sector have been revised downwards by an average of -14% to +13%, reflecting the 1Q25 results and anticipated market trends [1][43].