Core Viewpoint - The stock price of Hengerd (300946.SZ) surged, reaching a 20% limit up on May 12, with a 39% increase over the past three trading days, following the announcement of an acquisition deal with SMS Maschinenbau GmbH for its high-precision CNC grinding business for €8.5 million (approximately ¥69.36 million) [2][13]. Acquisition Details - Hengerd signed an asset purchase agreement with SMS Maschinenbau GmbH to acquire its high-precision CNC grinding business, including related assets, specific contractual rights and obligations, and personnel [2][3]. - The acquisition will be funded through Hengerd's own or self-raised funds, without involving share issuance or fundraising [3]. Company Performance - Hengerd's overseas revenue reached ¥78.67 million in 2024, marking a 46.35% year-on-year increase [11]. - The company reported a revenue of ¥585 million in 2024, a 7.88% increase, with a net profit of ¥87.31 million, showing a slight recovery [7]. Business Segments - In 2024, Hengerd's metal cutting tools business generated ¥495 million in sales, a 2.84% increase, while the intelligent CNC equipment business saw a 53.66% increase in sales to ¥35.53 million [8][9]. - The rolling functional components business achieved sales of ¥34.91 million, a 59.96% increase, with ongoing efforts to enhance product visibility and market influence [10]. International Strategy - The acquisition is expected to accelerate Hengerd's international expansion, establishing new overseas R&D and production bases, and enhancing its innovation capabilities in smart CNC equipment [5]. - Hengerd aims to build a business model of "European technology, Chinese manufacturing, global market" through this acquisition [5]. Profitability Metrics - Hengerd's gross margin for overseas operations was 42.55%, significantly higher than the domestic gross margin of 27.37% [11][12].

Financial Data and Key Metrics Changes - Sales decreased by 6% year over year, with metal cutting sales declining 4% organically and infrastructure declining 2% organically [9][25] - Adjusted EPS increased to $0.47 compared to $0.30 in the prior year quarter, driven by restructuring benefits and an advanced manufacturing tax credit [12][28] - Adjusted EBITDA and operating margins were 17.9% and 10.3% respectively, compared to 14.2% and 8.1% in the prior year quarter [27] Business Line Data and Key Metrics Changes - Metal cutting sales were down 7% year over year, with a 4% organic decline and unfavorable foreign currency exchange of 3% [29] - Infrastructure sales declined 4% year over year, with an organic decline of 2% and unfavorable foreign currency exchange of 2% [32] - Aerospace and defense sales increased by 28%, while energy declined by 3% mainly in The Americas [33] Market Data and Key Metrics Changes - EMEA remained the slowest market, down 4% on a constant currency basis, while The Americas and Asia Pacific both declined by 1% [9][30] - General engineering and transportation were largely impacted by market conditions in EMEA and The Americas [11][30] - Aerospace and defense showed slight improvement as supply chain constraints eased [49] Company Strategy and Development Direction - The company is focused on executing growth initiatives in aerospace and defense, despite overall market weakness [8][10] - A restructuring action was announced to lower structural costs by reducing employment costs and consolidating manufacturing operations [7][10] - The company aims to fully mitigate the impact of tariffs through various actions, including optimizing product flow and evaluating alternative supply options [20][21] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are short-term pressures across end markets, long-term trends for industrial production remain positive [11][12] - The company expects to achieve a $15 million annualized run rate savings from restructuring actions by June 30 [40] - Management remains committed to executing value creation initiatives to deliver a strong finish to fiscal 2025 [43] Other Important Information - The company returned $40 million to shareholders through share repurchase and dividend programs [36] - The estimated annual impact of tariffs is approximately $80 million, with ongoing mitigation actions in place [20][21] Q&A Session Summary Question: Can you discuss the outlook for the fourth quarter and demand trends? - Management indicated steady improvement in demand trends, with general engineering and transportation remaining flat, while aerospace and defense showed slight improvement [48][50] Question: Can you provide more details on tariff mitigation actions? - Management confirmed that they are confident in fully mitigating the direct impact of tariffs and have already begun implementing several actions [54][56] Question: What were the biggest surprises in the quarter relative to previous guidance? - The advanced manufacturing tax credit was a significant driver of performance, with tungsten prices expected to impact costs moving forward [66][68] Question: How is the competitive landscape affected by tariffs? - Management noted that they are performing better than peers and are well-positioned to utilize their global footprint to mitigate tariff impacts [73][74] Question: Are there any opportunities for M&A or portfolio optimization due to the changing trade situation? - Management acknowledged ongoing discussions regarding strategic priorities and potential portfolio actions in light of the tariff situation [81] Question: What is the pricing outlook for the final quarter of the year? - Management confirmed that the pricing outlook remains at approximately 2%, excluding tariff impacts [107]