Summary of the Conference Call for Yuan Zheng Technology Company Overview - **Company**: Yuan Zheng Technology - **Industry**: Automotive diagnostic equipment and software Key Financial Metrics - **Revenue**: - H1 2025 revenue was CNY 0.7 billion, but adjusted for deferred income, it should be CNY 1.016 billion, a 14% increase YoY [2][4] - Net profit reached CNY 1.96 billion, a 28% increase YoY, with a net profit margin improvement of 3 percentage points [2][4] - Adjusted net profit, considering foreign exchange losses, would be CNY 2.4 billion, maintaining a 28% growth rate [2][4] - **Product Shipments**: - Total device shipments were 167,000 units, a 16% increase YoY, driven by overseas markets (17% growth) and e-commerce channels (30% growth) [2][5] - DIY device shipments decreased slightly, while tire pressure sensors saw a significant increase of 87%, reaching 630,000 units [2][6] Expense Management - Total expenses increased by CNY 54 million, with financial expenses rising by over CNY 12 million [7][8] - R&D and management expenses were controlled within reasonable limits, with R&D expenses increasing by CNY 7 million [7][8] Business Segment Performance - **Self-developed Equipment**: Revenue was CNY 720 million, a 13% increase YoY, with a target of CNY 2 billion for the year [9] - **OEM Equipment**: Revenue decreased by 15% to CNY 100 million, with a stable gross margin [9] - **Software Business**: Reported revenue of CNY 70 million, a 13% decline YoY, but adjusted for deferred income, it shows a 28% growth [10] Service and Data Business - Strong performance in service and data segments, with remote diagnostic services and big data revenues growing by 53% and 61% respectively [11] - Expected to achieve a total of CNY 40 million in service and data revenue for the year [11] Market and Regional Performance - **Tire and New Energy Sector**: Revenue of CNY 28 million, a 51% increase YoY, but still short of the annual target of CNY 110 million [12] - **Overseas Market**: Revenue reached CNY 750 million, a 19% increase YoY, with a gross margin of 51% [13] - **Domestic Market**: Revenue decreased to CNY 210 million, primarily due to a drop in OEM equipment sales [14] Strategic Initiatives - Plans to introduce new energy equipment and data processing on-chain, adopting RWA models to expand the new energy equipment business [15] - Strategies to mitigate US tariffs include changing product codes and relocating some production to Vietnam [28] Future Outlook - The company is optimistic about achieving its revenue targets for the second half of the year, particularly in the new energy and tire sectors [12][22] - Anticipates a significant increase in sales from new products, with a target of CNY 80 million in revenue for the second half [22] Investment Considerations - The company maintains a high market share in domestic diagnostic equipment, exceeding 70% [29] - The overall growth target for the year is CNY 2.184 billion, with a 20% YoY increase expected [20] - The company is viewed as a solid investment opportunity with a P/E ratio of approximately 10 times and a dividend yield of around 8% [37]