Summary of the Conference Call for Hangcai Co., Ltd. Company Overview - **Company**: Hangcai Co., Ltd. - **Industry**: Aerospace materials and components Key Points Financial Performance - **Revenue**: For the first three quarters of 2025, revenue was 2.039 billion yuan, a decrease of 7% year-on-year [4] - **Net Profit**: Net profit was 400 million yuan, down 8.23% year-on-year [4] - **Segment Performance**: - Transparent components: Revenue of 210 million yuan, down 9% [4] - Rubber and sealing materials: Revenue of 680 million yuan, stable year-on-year [4] - High-temperature alloy mother alloy: Revenue of 656 million yuan, down 8% [4] - Cast titanium alloy: Revenue of 4.489 billion yuan, down 12% [4] Business Segments and Margins - **Gross Margins**: - Transparent components: Approximately 40%, slightly down due to new production line costs [5] - Rubber industry: Approximately 57%, up from 55% last year [5] - High-temperature alloy mother alloy: Approximately 14%, up from 13% last year [5] - Cast titanium alloy: Margins between 12% and 18%, slightly increased but facing price pressure [5] Market Dynamics - **Titanium Alloy Business**: - Downstream sectors include aerospace, aviation, and space, with significant revenue declines in aviation (down 40%) and aerospace (down 30%) [6] - Export market revenue increased by nearly 30% to 150 million yuan [6] - Domestic civil aircraft revenue grew by 40% to 15 million yuan [6] Strategic Developments - **Acquisition of Zhejiang Titanium Alloy**: The recovery of equity did not significantly enhance foreign market share due to existing long-term agreements with clients like Safran Group [7] - **High-Temperature Alloy Capacity**: Total melting capacity can reach 5,000-6,000 tons through leasing and purchasing equipment [14] - **Knowledge Transfer**: Ongoing knowledge transfer of intellectual property without impacting existing capacity [13] Product Development - **Transparent Components**: Increased revenue from fighter jets (195 million yuan) while helicopter revenue decreased [17] - **Large Aircraft Windshield Project**: Actively progressing, with technology comparable to overseas competitors [18] - **Rubber Sealing Business**: Significant revenue from various products, expected to grow with the aerospace industry [19] Future Outlook - **Financial Goals**: Despite pressures, there is hope to meet annual financial targets due to diverse business segments [22] - **Five-Year Plan**: Currently formulating the 15th Five-Year Plan, with clearer demand expected by mid-2026 [23] - **Employee Stock Plans**: Plans to avoid concentrated sell-offs post-employee stock expiration in 2026 [26] Market Trends - **Gas Turbine Alloy Market**: Domestic demand is growing, particularly in maintenance markets transitioning from imports to domestic products [27] - **International Gas Turbine Business**: Focus remains on domestic development while maintaining contact with foreign clients [28] Additional Insights - **Profitability Pressure**: No significant downward pressure on margins anticipated despite bulk purchasing price reductions [20] - **Domestic Replacement Value**: Estimated future value of domestic replacements for civil aircraft rubber sealing components is around 3 million yuan [21]

Core Viewpoint - The company reported a decline in Q3 revenue and net profit due to delayed military product demand, but remains optimistic about returning to stable growth as a leading platform for specialty materials [1][2]. Financial Performance - Q3 revenue reached 679 million yuan, down 1.14% year-on-year and 4.09% quarter-on-quarter, with a net profit of 120 million yuan, down 4.01% year-on-year and 17.62% quarter-on-quarter [1]. - For the first three quarters of 2025, revenue totaled 2.039 billion yuan, a year-on-year decrease of 7.14%, while net profit was 400 million yuan, an 8.23% year-on-year increase [1]. - The gross margin for Q3 was 30.82%, a decrease of 2.23 percentage points year-on-year, attributed to changes in product mix [1]. Research and Development - R&D investment in Q3 was 53.31 million yuan, reflecting a year-on-year increase of 24.54%, indicating a commitment to innovation despite short-term profit declines [1][2]. Market Demand and Procurement - As of Q3 2025, accounts payable increased by 11.39% to 726 million yuan, and prepayments surged by 90% to 106 million yuan, suggesting resilient downstream demand [2]. - The company is actively exploring new growth areas, including low-altitude economy and advanced materials for military and civilian applications [2]. Business Development and Product Lines - The company is a key supplier of titanium alloy castings for international civil aviation, with a comprehensive product range [3]. - It has developed core technologies in rubber and sealing materials, achieving international advanced and domestic leading levels [3]. - The company is also involved in the production of transparent components for advanced fighter jets and is expanding its capacity in high-temperature alloy materials [3]. Profit Forecast and Valuation - The profit forecast for 2025-2027 estimates net profits of 615 million, 736 million, and 885 million yuan, respectively, with corresponding EPS of 1.37, 1.64, and 1.97 yuan [4]. - The target price has been adjusted to 59.04 yuan, based on a projected PE ratio of 36 for 2026, reflecting the company's technological advantages and strong resource backing [4].