Core Viewpoint - Huafang Co., Ltd. (600885.SH) is rated as a "Buy" by Huazhong Securities due to its strong performance in the electromagnetic relay sector and significant growth in high-voltage control boxes, alongside the solid development of its new product categories [2] Group 1: Company Performance - The electromagnetic relay segment continues to lead the market, demonstrating robust growth [2] - High-voltage control boxes have experienced a year-on-year high growth rate [2] Group 2: Product Development - The "5+" new product categories are developing steadily, with ongoing market expansion and breakthroughs [2]

Investment Rating - Investment rating is maintained as "Buy" [1] Core Views - The company reported a revenue of 8.347 billion yuan for the first half of 2025, representing a year-on-year growth of 15.43% [2] - The net profit attributable to shareholders reached 964 million yuan, up 14.19% year-on-year, with a non-recurring net profit of 927 million yuan, growing 17.85% year-on-year [2] - The gross margin stood at 34.24%, a decrease of 0.54 percentage points year-on-year [2] Performance Summary - In Q2 2025, the company achieved a revenue of 4.364 billion yuan, reflecting a year-on-year increase of 15.51% [2] - The net profit attributable to shareholders for Q2 was 553 million yuan, up 13.25% year-on-year, with a non-recurring net profit of 546 million yuan, growing 20.52% year-on-year [2] - The gross margin for Q2 was 34.67%, with a slight increase of 0.03 percentage points year-on-year and 0.90 percentage points quarter-on-quarter [2] Product Performance - The company's relay products generated a revenue of 7.614 billion yuan in H1 2025, marking a year-on-year growth of 17.26% [3] - The company maintains the largest market share globally in the relay market, driven by strong growth in smart home, industrial automation, photovoltaic sectors, and the rapid development of electric vehicles [3] - The high-voltage control box project for electric vehicles is progressing smoothly, showing significant year-on-year growth [3] New Product Development - The "5+" new product categories, including switches, connectors, capacitors, fuses, and current sensors, are developing steadily [4] - The shipment of film capacitors increased by 31% year-on-year, and current sensors saw a 36% year-on-year growth [4] - The ceramic block DC fast fuse HPE509 received UL certification, indicating potential for stable growth as new customer projects are introduced [4] Financial Projections - Revenue projections for 2025, 2026, and 2027 are 16.371 billion yuan, 18.892 billion yuan, and 21.770 billion yuan, respectively [5] - Net profit projections for the same years are 1.961 billion yuan, 2.281 billion yuan, and 2.487 billion yuan, respectively [5] - Corresponding P/E ratios are expected to be 18.3, 15.7, and 14.4 times [5]

Summary of the Conference Call for Hongfa Technology Co., Ltd. Company Overview - **Company**: Hongfa Technology Co., Ltd. - **Industry**: Relay and electrical components manufacturing Key Points and Arguments Business Performance - Overall business growth for the first half of 2025 was approximately 1% [2] - Significant growth in the new energy vehicle sector, with high-voltage direct current relay shipments reaching 2.6 billion, a year-on-year increase of over 40% [2][5] - High-voltage control box shipments grew nearly 200%, driven by competitive advantages and new model adoptions [2][3] - Home appliance business achieved revenue of 1.6 billion, a year-on-year increase of 5.8% despite fierce competition [4] Market Dynamics - European market for high-voltage direct current relays showed rapid growth, with increasing revenue contribution due to accelerated electrification [2][13] - Industrial relay market experienced a recovery with a year-on-year shipment increase of 26.9%, driven by demand from new energy-related industrial clients [2][15] - Low-voltage switch products saw slight growth, with component sales up about 10%, but complete equipment sales declined by approximately 20% due to real estate sector impacts [4][6] Future Outlook - Company remains optimistic about future growth, particularly in the new energy vehicle sector, with plans to expand high-voltage common rail modules [7] - High-voltage control box business expected to reach a scale of 800 to 1,000 million in the next one to two years [12] - Continued focus on optimizing business segments to adapt to global market changes and enhance operational efficiency [7] Regional Performance - Overseas markets, especially Europe and the U.S., showed significant demand increases for industrial relays [16] - The company is expanding its overseas production capacity, with ongoing projects in Indonesia and Germany [20] Product Development - New products such as capacitors, fuses, and current sensors have shown promising market performance, particularly in the automotive sector [8] - Connector business faced fluctuations but entered new markets like energy storage and satellite communication [9] Financial Metrics - Gross margin maintained between 35% and 40%, with expectations of stable profitability in the second half of the year [10] - The company anticipates overcoming rising labor and material costs with a target of around 10% growth [10] Challenges and Risks - The company faced challenges in the low-voltage switch product segment due to real estate market impacts [4][19] - The North American market showed pressure in the current sensor and electric meter segments, although growth in charging equipment and data centers was noted [19][29] Strategic Initiatives - Plans to enhance automation and cultivate cross-national production management talent to support long-term growth [21] - Expansion of production facilities in Indonesia and Germany to bolster global competitiveness [20][22] Conclusion - Hongfa Technology Co., Ltd. is positioned for continued growth in the new energy vehicle and industrial relay markets, with strategic initiatives aimed at enhancing operational efficiency and expanding market presence. The company remains vigilant about market challenges while leveraging its competitive advantages in product offerings.