Summary of Hengli Hydraulic Conference Call Company Overview - **Company**: Hengli Hydraulic (601100.SS) - **Industry**: Hydraulic components and systems Key Points Revenue and Earnings Forecast - Ball screw and linear guide revenue is projected to be between Rmb120 million and Rmb130 million in 2025, significantly lower than the previous guidance of Rmb250 million [1] - The estimated net loss for the ball screw and linear guide business is expected to widen from approximately Rmb50 million in 2024 to between Rmb60 million and Rmb80 million in 2025 [1] - Despite challenges in the ball screw segment, Hengli's overall earnings growth is anticipated to accelerate to double digits year-over-year in 2025, up from 0% in 2024, driven by strong performance in the excavator component business [1] Quarterly Performance Expectations - A slight quarter-over-quarter revenue decline is expected in 3Q25, attributed to strong growth in excavator components and recovery in non-excavator products [2] - Gross profit margin (GPM) for 3Q25 is estimated to be around 42%-45% [2] - Projected earnings growth for 3Q25 is estimated at 32% year-over-year, with revenue growth of 25% and a 2.0 percentage point GPM expansion [2] Humanoid Robot Business - Management is optimistic about penetrating the supply chain of a leading US NEV maker for humanoid robot components, citing competitive advantages in R&D and cost structure [2] - Plans to build humanoid robot product capacity in France and the US are in progress [2] Chairman's Share Disposal - The Chairman announced the disposal of up to 40.2 million shares (3% of total shares) between September 1, 2025, and November 30, 2025 [3] - As of the latest update, one-third of the announced shares have been sold, with proceeds intended for investment in humanoid robot-related businesses overseas [3] Mexico Plant Performance - Revenue from the Mexico plant is projected to reach Rmb100 million in 2025, with expectations to barely break even [7] Valuation and Market Outlook - The target price for Hengli is set at Rmb105.0, based on a 43x 2025E P/E ratio, which aligns with its historical average [16] - Current market capitalization is Rmb125.152 billion (approximately US$17.597 billion) [5] Risks - Key risks include weaker demand for excavator and non-excavator components, reduced profitability from the ball screw and Mexico plants, and lower-than-expected GPM due to unfavorable product mix changes [17] Investment Recommendation - The recommendation for Hengli is a "Buy" rating, with an expected share price return of 12.5% and a total return of 13.4% [5]