Summary of Shenzhen Envicool Technology Conference Call Company Overview - **Company**: Shenzhen Envicool Technology (002837.SZ) - **Industry**: Data Center Cooling Solutions Key Points Stock Performance - Envicool's stock increased by 20% over two trading days without specific company news, with trading volumes reaching Rmb1.05 billion and Rmb2.86 billion respectively [1][2] - The stock's valuation is currently at 63x and 49x PE for 2025E and 2026E, indicating it may be slightly overbought in the near term [1] Financial Performance Expectations - Envicool is expected to announce its 2Q25 results on August 19, with anticipated revenue growth of 32.0% and earnings growth of 30.5% [2] - The company experienced a revenue decline of over 20% year-over-year in the previous two quarters due to deferred revenue recognition [2] - Gross margin is forecasted to contract by 3.1 percentage points year-over-year to 29.0% in 2Q25, influenced by accounting policy changes and a shift in revenue mix towards domestic growth [2] Order Book and Market Position - Management indicated a strong order book for 2H25, with order growth estimated at over 40% at the end of 1Q25 and expected to maintain a similar pace at the end of 2Q25 [3] - Envicool's comprehensive cooling solutions are well-positioned to benefit from the growing demand for AI infrastructure in China, with data centers expected to account for over 60% of total sales by 2027 [4] Competitive Landscape - Despite being a certified cooling partner for Nvidia since October 2024, Envicool currently has limited business transactions with Nvidia [4][8] - The company is focusing on displacing Taiwanese competitors in the Chinese data center market [4] Industry Insights - Positive outlook from Vertiv, a competitor, with reported revenue growth of 34% in 2Q25 driven by AI infrastructure build among hyperscalers [9] - Vertiv raised its full-year revenue guidance by US$150 million, indicating strong market demand [9] Valuation and Risks - Target price for Envicool set at Rmb39, based on a PE of approximately 48x for 2026E, reflecting a premium over market averages due to its competitive advantages [12] - Risks include pricing pressure in China, slower launches of new products from competitors, potential de-rating of the AI sector, and increased tariffs from the US [13] Conclusion - Envicool is positioned for recovery with expected positive growth in earnings and revenue, supported by a strong order book and favorable industry trends, although it faces valuation concerns and competitive risks in the market [1][2][12][13]