Summary of Conference Call Notes Industry and Companies Involved - **Industry**: Electric Motor Suppliers in China - **Companies**: Johnson Electric and Wolong Electric Core Insights and Arguments - **Valuation-Driven Correction**: The recent share price correction for Johnson Electric and Wolong Electric is viewed as valuation-driven rather than based on the underlying investment thesis [2][8] - **Muted Earnings Expectations**: Anticipated muted earnings for 3Q25 for both companies, but the long-term structural drivers remain intact [2][8] - **Core Structural Drivers**: The three main structural drivers identified are: - AI Data Centers (AIDC) - Humanoid/Industrial Robotics - eVTOL (Electric Vertical Takeoff and Landing) and low-altitude economy [2][4] Key Developments - **AIDC Developments**: - Nvidia's Blackwell Ultra platform deployment is ramping up in October, with the first US-made Blackwell wafer unveiled on October 17 [4] - Alibaba announced a new green AI data center in Dubai expected to be operational by 2026, indicating global AI compute expansion [4] - **Robotics Sector Growth**: - Zhiyuan launched its Elf G2 and expects robotics revenue to grow more than tenfold YoY in 2025 [4] - Shanghai's AI terminal action plan prioritizes humanoid robots, benefiting companies like Shanghai Electric, a partner of Johnson [4] - UBTECH secured additional orders for its Walker S-series, reinforcing the acceleration of humanoid adoption [4] Policy and Market Indicators - **20th CCP Fourth Plenary Session**: Expected to reaffirm national strategic technologies, including AI industrialization and low-altitude economy ecosystems [2][8] - **eVTOL as a Strategic Priority**: The low-altitude economy and eVTOL are anticipated to be elevated as strategic national development priorities during the Fourth Plenary [8] Investment Outlook - **Investment Ratings**: - Johnson Electric is rated as Overweight (OW) due to its superior operating leverage in AIDC and humanoid robotics [8] - Wolong Electric is rated Neutral (N) as its structural story remains compelling, but near-term valuation is less favorable [8] - **Catalysts to Monitor**: Key catalysts include order wins, production ramp updates, and policy support that could influence the investment case for both companies [6][7] Additional Important Points - **Market Dynamics**: The report emphasizes that the recent pullback in stock prices is driven by macroeconomic factors rather than the companies' fundamental performance [8] - **Potential Risks**: Risks include faster-than-expected adoption of next-gen cooling technologies that could impact demand for existing products [7] This summary encapsulates the key points from the conference call, focusing on the industry context, company-specific developments, and investment outlook.

Summary of the Conference Call on China Electric Motor Suppliers Industry Overview - The report focuses on the electric motor supply industry in China, specifically covering **Johnson Electric** and **Wolong Electric** as key players in the sector [2][8][9]. Core Insights and Arguments Company Ratings and Price Targets - **Johnson Electric** is rated **Overweight (OW)** with a price target of **HK$67**, indicating an **82% potential upside** from current levels [3][31]. - **Wolong Electric** is rated **Neutral** with a price target of **Rmb43**, suggesting a **10% potential downside** [3][31]. Growth Drivers 1. **AI Data Centers**: - Johnson and Wolong are expanding into liquid cooling components, with a total addressable market (TAM) projected at **Rmb4 billion** for EC motors, **Rmb6 billion** for direct-to-chip cooling pumps, and **Rmb12 billion** for cold plates by 2026 [24][34]. - The shift from air to liquid cooling is driven by the increasing power density of AI servers, creating significant opportunities for both companies [34][35]. 2. **Humanoid Robotics**: - The global TAM for humanoid robotics is estimated at **5 billion units**. Johnson focuses on integrated actuators with higher content per humanoid, while Wolong has a broader reach with lighter-duty solutions [26][43][45]. - The dollar content per robot is approximately **Rmb106k** for Johnson and **Rmb76k** for Wolong, indicating substantial potential earnings upside [26][44]. 3. **eVTOL (Electric Vertical Takeoff and Landing)**: - The domestic eVTOL market in China is expected to reach **5,000 units/year by 2035**. Wolong is more exposed in this area, partnering with Geely's AeroFugia [27][28]. Valuation Insights - Johnson is seen as undervalued, trading at **16x CY26E P/E** compared to Wolong's **52x CY26E P/E**, despite similar earnings growth projections [5][31]. - The report suggests that Johnson's growth potential in AI cooling and robotics remains underappreciated, while Wolong's valuation reflects its current growth trajectory [17][31]. Near-term Catalysts - For **Johnson Electric**: - Tesla Optimus pilot hand validation (1H26) - AI cooling architecture developments - Participation in humanoid forums [5]. - For **Wolong Electric**: - Humanoid targets from Zhiyuan/Lenovo (end-25) - AeroFugia eVTOL certification (1H26) - HKEX IPO filing (1Q26) [5]. Other Important Insights - The report emphasizes the structural opportunity driven by secular demand in the electric motor supply chain, with both companies emerging as critical partners in high-growth verticals [8][22]. - The competitive landscape is evolving, with both Johnson and Wolong positioned to capture significant market share as demand for high-performance motor solutions increases [22][39]. Conclusion - The analysis indicates a positive outlook for the electric motor supply industry in China, with Johnson Electric positioned for substantial upside due to its undervaluation and growth potential in emerging sectors like AI cooling and humanoid robotics, while Wolong Electric's valuation appears to already reflect its growth prospects.