Summary of Haoneng Co., Ltd. Conference Call Company Overview - Haoneng Co., Ltd. has entered the aerospace sector through the acquisition of Haoneng Qiang, establishing a dual focus on automotive and aerospace industries, while actively expanding into the new energy vehicle (NEV) planetary gearbox and robotic gearbox businesses for diversified development [2][4] Key Business Segments Automotive Business - Automotive business accounts for approximately 86% of total revenue, with a stable synchronizer business and high market share; the differential gear business is accelerating domestic substitution, with significant gross margin improvements, especially in the commercial vehicle AMT heavy truck sector, where it has entered the first tier of R&D and production, forming exclusive partnerships with several OEMs [2][8] - The synchronizer business is expected to maintain steady growth, benefiting from the adoption of DCT gearboxes by domestic brands and plug-in hybrid models, as well as improvements in the heavy truck AMT gearbox market [2][11] - The differential gear business is poised for growth due to increasing demand for four-wheel drive models and domestic substitution trends, with market size expected to continue expanding [2][14] Aerospace Business - Aerospace revenue accounts for approximately 11%-12% of total revenue, with a gross margin of about 45%; the company plans to expand production capacity, benefiting from rapid growth of downstream customers like C919 [3][17] New Energy Vehicle and Robotics - The company is expanding into hollow motor shafts, which offer advantages in lightweight design, high-speed capability, and cooling efficiency, enhancing the performance of electric vehicles [2][15] - Haoneng is also venturing into the robotic gearbox sector, leveraging its existing technology and manufacturing capabilities from the automotive sector, with significant investments planned for smart manufacturing projects [18][19] Financial Performance - The company's gross margin has decreased to 31% due to high dilution costs in the differential gear business and changes in product structure in the aerospace sector; however, it is expected to recover to around 35% as new products and projects come online and automotive parts business grows [7] Market Trends and Competitive Advantages - The new energy era is increasing the demand for gear precision and quiet operation, with a shift towards third-party gear manufacturers as supply chains open up [11][12] - Haoneng holds competitive advantages in mold design, material composition, high-precision cutting, and heat treatment processes, along with a broad customer base including major automotive manufacturers [12] Future Outlook - The global automotive differential market is projected to grow from approximately $21.4 billion in 2024 to $25.3 billion by 2029, with a compound annual growth rate (CAGR) of about 8% [14] - Haoneng's revenue projections for 2025 and 2026 are approximately 2.95 billion yuan and 3.56 billion yuan, respectively, with net profits of 430 million yuan and 520 million yuan, indicating a favorable outlook for the company [19]

Investment Rating - The report maintains a "Strong Buy" rating for the company, expecting it to outperform the benchmark index by over 20% in the next six months [2][8]. Core Views - The company's Q1 2025 performance exceeded expectations, with revenue of 620 million yuan, a year-on-year increase of 13%, and a net profit of 104 million yuan, reflecting a 30% year-on-year growth [2][8]. - The company is projected to continue its rapid growth in 2025, with expectations of nearly 40% growth driven by the differential gear, military, and traditional businesses [8]. - The company aims to become a leading supplier in the domestic automotive transmission system and a core component supplier for robotics, with plans for new product development [8]. Financial Summary - **Revenue Forecast**: The total revenue is expected to grow from 2,360 million yuan in 2024 to 4,013 million yuan in 2027, with year-on-year growth rates of 21.3%, 20.2%, 18.6%, and 19.2% respectively [4][9]. - **Net Profit Forecast**: The net profit is projected to increase from 322 million yuan in 2024 to 684 million yuan in 2027, with growth rates of 76.9%, 40.4%, 23.4%, and 22.8% respectively [4][9]. - **Earnings Per Share (EPS)**: EPS is expected to rise from 0.39 yuan in 2024 to 0.82 yuan in 2027 [4][9]. - **Price-to-Earnings Ratio (P/E)**: The P/E ratio is forecasted to decrease from 37 in 2024 to 17 in 2027 [4][9]. - **Price Target**: The target price is adjusted to 16.3-19.0 yuan based on a projected P/E of 30-35 for 2025 [8].

Investment Rating - The report maintains a "Strong Buy" rating for the company, expecting it to outperform the benchmark index by over 20% in the next six months [2][8][18]. Core Views - The company's Q1 2025 performance exceeded expectations, with revenue of 620 million yuan, a year-on-year increase of 13%, and a net profit of 104 million yuan, up 30% year-on-year [2][4]. - The company is projected to continue its rapid growth in 2025, with expectations of nearly 40% growth driven by the differential gear and aerospace businesses [4][8]. - The company aims to become a leading supplier in the domestic automotive transmission system and a core component supplier for robotics, with plans for new product development [4][8]. Financial Summary - **2025 Financial Projections**: - Total revenue is expected to reach 2,837 million yuan in 2025, with a year-on-year growth rate of 20.2% [4]. - Net profit is projected at 452 million yuan, reflecting a year-on-year growth of 40.4% [4]. - Earnings per share (EPS) is forecasted to be 0.54 yuan [4]. - **Valuation Metrics**: - The price-to-earnings (P/E) ratio is expected to be 26 times in 2025, decreasing to 17 times by 2027 [4]. - The price-to-book (P/B) ratio is projected to decline from 3.2 in 2025 to 2.6 in 2027 [4]. - **Market Performance**: - The company's stock price target is set between 16.3 and 19.0 yuan, with the current price at 14.25 yuan [4][8]. Business Growth Drivers - The differential gear business is expected to see a revenue increase of 60% in 2025, contributing significantly to net profit growth [4][8]. - The aerospace business is anticipated to grow by over 30% in 2025, supported by increased downstream installation volumes [4][8]. - Traditional businesses are projected to grow by around 5% due to recovery in exports and heavy truck sales [4][8]. Strategic Initiatives - The company has signed an investment contract with the Chongqing government to develop a smart manufacturing core component project, with an initial investment of 1 billion yuan [4][8]. - Plans include the development of new products such as hollow motor shafts and reducers to capitalize on trends in electrification and supply chain specialization [4][8].

Summary of Conference Call Notes Company and Industry Overview - The conference call discusses **Changjiang Automobile** and its joint venture with **Tuman Intelligent**, focusing on the **four-wheel drive system** and **screw rod production**. The collaboration aims to leverage both companies' strengths to overcome technical bottlenecks and enhance equipment qualifications and R&D capabilities [2][5]. Key Financial Performance and Growth Factors - In Q1 2025, Changjiang Automobile reported **revenue of 180 million yuan**, a **26% year-on-year increase**, with a profit of approximately **70 million yuan**, reflecting a **37% growth**. The revenue growth is primarily driven by overseas markets, with expectations for continued contributions from traditional business in 2025 [4][40]. - The gross margin for Q1 2025 improved due to **scale effects** and **internal process enhancements**, particularly a **10% increase in assembly line efficiency**. This improvement helped meet the rising demand from clients like BYD [2][6][7]. - The company anticipates **20%+ overall revenue growth** in 2025, with overseas revenue expected to rise from **40% in 2024 to 50% in 2025** [3][40]. Market Expansion and Performance - The Czech market is projected to grow by **80% in 2024**, with a net profit margin of **20%**, while the Mexican market is expected to grow by **30%**. This indicates significant revenue and profitability improvements in overseas markets [2][8]. - BYD is expected to account for approximately **15% of revenue in 2024**, with Volkswagen contributing around **40-50%**, of which **30% is from overseas**. BYD's sales are projected to increase significantly in 2025, potentially enhancing market share for Changjiang [25][37]. Joint Venture and Product Development - The joint venture with Tuman Intelligent will focus on producing screw rods using **extrusion and grinding processes**, targeting both vehicle and robotics sectors. The partnership includes exclusive agreements to protect interests and is expected to start sample deliveries in the second half of 2025 [2][10][21]. - The company is also developing screw rod equipment in collaboration with Tuman, leveraging Tuman's strengths in gear machine tools and grinding machines [11][12]. Challenges and Strategic Considerations - Despite strong overseas growth, the company faces challenges in management, particularly regarding local employee management and initial profit margins. However, the European market remains profitable, and the company is optimistic about its performance [30][31]. - The company plans to maintain a **high capacity utilization rate** of **80-90%** in overseas markets, with ongoing improvements in assembly line efficiency to support profitability [26]. Research and Development - R&D expenses are expected to increase in 2025, particularly for the **magnetic steel project**, with a total budget of **500 million yuan**. The company is in the early stages of this project, with significant investments planned for future phases [47][48]. Conclusion and Investor Communication - The company is in a preliminary R&D phase, with many details remaining confidential. The chairman expresses confidence in the company's future and encourages investors to reach out with any questions [54].