Summary of Zhaochi Co., Ltd. Conference Call Company Overview - **Company**: Zhaochi Co., Ltd. (兆驰股份) - **Industry**: LED and TV ODM (Original Design Manufacturer) Key Points and Arguments Impact of U.S. Tariff Policies - Zhaochi's TV ODM business is under pressure due to reduced orders from the North American market caused by U.S. tariff policies [2][3] - The company is accelerating the transfer of production lines to Vietnam to mitigate tariff impacts, with expectations of profit recovery starting in Q3 2025 [2][4][5] Performance in LED Industry - Zhaochi has become a leading player in the LED industry, achieving nearly 20% net profit margin through an integrated supply chain model [2][6] - The company has maintained a strong position in the LED chip sector, enhancing profitability and risk resilience [6] Expansion into Optical Communication - Zhaochi is entering the optical communication field, leveraging its LED chip technology to produce materials like indium phosphide, gallium arsenide, and gallium nitride [2][10] - The acquisition of Ruigu Communication has strengthened Zhaochi's capabilities in optical devices [10] - Expected revenue from optical communication is projected to reach 400-500 million yuan by 2025, with a goal of achieving a gross margin close to 25% by increasing proprietary chip ratios [10][11] Future Growth Catalysts - Successful relocation of TV ODM production to Vietnam is anticipated to alleviate negative impacts from U.S.-China trade tensions [7] - The company has not engaged in refinancing since its IPO, indicating strong internal cash flow and reduced reliance on external financing [7] - Zhaochi's clean shareholding structure and lack of refinancing needs position it well for future growth [4][17] Micro LED Technology Potential - Microsoft is promoting a new optical chain technology based on Micro LED, which could significantly impact the industry and provide new opportunities for Zhaochi [13][15] - Zhaochi, as a leader in the Micro LED sector, is well-positioned to benefit from the technology's application in the Chinese market [15][16] Current Valuation and Future Expectations - Zhaochi's current valuation is approximately 15 times earnings, with expected performance in 2025 projected between 1.5 to 1.6 billion yuan, slightly down from the previous year [17] - Anticipated recovery in 2026 to around 1.8 to 1.9 billion yuan could justify a valuation of 20 times earnings, suggesting a potential stock price increase of over 50% [4][17] Additional Important Insights - Zhaochi's integrated production model in TV manufacturing allows for high-quality component production, enhancing competitive advantages [8][9] - The company is exploring new markets, including AI servers and data centers, which could provide additional growth avenues [11][12]