Summary of Sanhua Intelligent Controls Conference Call Company Overview - **Company**: Sanhua Intelligent Controls (002050.SZ) - **Industry**: HVAC control and thermal management components Key Financial Highlights - **FY25 Pre-announcement**: Sanhua expects net income between Rmb3,874 million and Rmb4,649 million, representing a year-over-year increase of 25%-50% [1] - **4Q25 Net Profit**: Expected to be between Rmb634 million and Rmb1,406 million, indicating a year-over-year change of -21% to +76% [1] Growth Expectations - **Growth Moderation**: Anticipated growth moderation in the main business for the next two quarters, with a stable outlook for FY26 [2] - **HVAC Segment**: Continued growth pressure expected due to a high base, but potential improvement anticipated in 2026 due to likely trade-in policy extensions [5] - **EV Component Segment**: Revenue growth forecast remains unchanged at +12% for 4Q25, +12% for 1Q26, and +15% for 2Q26 [5] Customer Insights - **Tesla**: Represents approximately 25%-30% of the EV component segment revenue, with 4Q25 delivery forecast at 445K units, a 10% year-over-year decline [5] - **BYD**: Accounts for about 15%-20% of segment revenue; management expresses confidence in long-term overseas expansion despite demand uncertainty in China [5] Valuation and Price Target - **Target Price**: Rmb40.90 for Sanhua A shares and HK$43.10 for Sanhua H shares, based on a 2030E P/E of 25x, discounted back to 2026E with a cost of equity of 9.5% [9] - **Current Share Prices**: Rmb45.42 for Sanhua A and HK$35.42 for Sanhua H, indicating a downside of 10% for A shares and an upside of 21.7% for H shares [12] Investment Thesis - **Growth Potential**: Expected revenue and net profit CAGR of 18% from 2025 to 2030 [11] - **Market Position**: Strong position in HVAC and potential growth in humanoid robot actuators [11] - **Risks**: Key risks include slower-than-expected revenue from humanoid robots, global EV sales, and home appliance sales [10][11] Additional Insights - **Valuation Comparison**: Sanhua H shares have seen a price movement of -14% compared to the Hang Seng Index, while A shares have moved -9% compared to the CSI300 [8] - **Tesla Optimus Gen3**: Performance of this product is crucial for further upside in share price, with the next performance check expected in February/March 2026 [8] Conclusion Sanhua Intelligent Controls is positioned for growth in the HVAC and EV segments, with a stable outlook for FY26 despite anticipated short-term growth moderation. The company’s valuation appears attractive relative to its growth potential, but risks remain that could impact future performance.

Summary of Sanhua A/H (002050.SZ/2050.HK) Earnings Call Company Overview - **Company**: Sanhua Intelligent Controls - **Industry**: HVAC (Heating, Ventilation, and Air Conditioning) and thermal management components Key Financial Performance - **2Q25 Results**: - Revenue: Rmb8,593 million (+19% YoY) - Gross Profit: Rmb2,515 million (+25% YoY) - EBIT: Rmb1,459 million (+50% YoY) - Net Income: Rmb1,207 million (+39% YoY) - GPM: 29% (+1pp YoY) - OPM: 17% (+4pp YoY) - NPM: 14% (+1pp YoY) - **1H25 Performance**: - Revenue: Rmb10,389 million (+25% YoY) - GPM: 28.2% (+0.6pp YoY) - NPM: 12.4% (+2.2pp YoY) - **2025 Guidance**: Management raised revenue growth expectations to at least 15% YoY and net profit growth to 20-30% YoY, up from initial guidance of 10-15% YoY for both metrics [1][7][10]. Core Business Drivers - **HVAC Control Components**: - Revenue growth driven by commercial HVAC demand and low-AC penetration regions, with a 25% YoY increase in revenue and a 53% YoY increase in net profit for 1H25 [1][7]. - **AIDC Liquid Cooling**: - Revenue expected to exceed Rmb1 billion in 2024, representing approximately 10% global market share. The company has more exposure to data center room cooling than server cooling, which is beneficial amid expected moderation in China’s EV/HVAC growth [1][7][10]. - **EV Thermal Management**: - Despite Tesla's anticipated 15% YoY decline in 2025E, segment revenue grew 9% YoY, with net profit increasing 22% YoY in 1H25. Diversification from other customers like Xiaomi, Leapmotor, and GM is expected to offset Tesla's decline [1][7][10]. Humanoid Robot Components - Management believes humanoid robots represent a significant long-term AI application. The Thailand factory is set for volume production in 3Q25, with stable market leadership expected despite supply chain uncertainties [6][10]. Margin Improvement Factors - Significant GPM and NPM improvements attributed to economies of scale, effective cost control, and a favorable product mix shift towards higher-margin commercial HVAC components. SG&A as a percentage of revenue decreased to 11.1% in 2Q25 [8][10]. Investment Thesis - Sanhua is rated as a "Buy" due to its growth potential in humanoid robot actuators and solid market leadership in core HVAC business. Expected revenue and net profit CAGR of 19% from 2025-2030E. The company is well-positioned to outperform the residential HVAC industry and benefit from global EV penetration increases [10][11]. Target Price and Valuation - New 12-month target price set at Rmb32.7 and HK$34.4, based on a 2030E P/E of 21x, discounted back to 2026E with a cost of equity of 9.5% [11]. Risks and Upside Potential - Key upside risks include easing pricing competition, abating headwinds in new testing areas, better-than-expected margins, and faster development in low-altitude economies [11].