Company Overview - Hayward Holdings, Inc. (NYSE:HAYW) is a leading global pool equipment manufacturer, primarily serving the residential pool market, with North America accounting for 85% of sales and over 90% of profits [3] - The company offers a range of products including Pumps, Automation and Sanitization, Heaters, Filters, Lighting and Water Features, and Cleaners [3] - Approximately 80% of total sales come from the existing installed base of pools, with 50% attributed to repair and replacement, making the business relatively resilient to economic cycles [3] Financial Performance - Hayward Holdings, Inc. has demonstrated strong margins and cash-generation potential, leading the fund to view the stock as undervalued relative to mid-cycle earnings [2] - The stock's one-month return was approximately 5.51%, and it gained about 11.59% over the last 12 months, closing at approximately $16.85 per share on January 16, 2026, with a market capitalization of about $3.65 billion [2] Market Dynamics - The pool industry experienced supercharged growth during the early stages of COVID-19, followed by a period of weak end-market demand exacerbated by destocking in the distribution channel [3] - Although the industry has stabilized, there is still lackluster demand for newly built and remodeled pools, but it is expected that the discretionary sides of the business will recover over time [3] - Hayward is positioned to continue raising prices and growing volumes within the installed base of pools due to strong pricing power, as purchase decisions are typically made by pool service professionals who are less sensitive to price [3]

Summary of Conference Call Notes on China Industrials Industry Overview - The conference call discusses the **China Industrials** sector, focusing on the implications of the **2026 Consumption Subsidy Scheme** announced by the National Development and Reform Commission (NDRC) [1] Key Points Consumption Subsidy Scheme - The **2026 subsidy program** has a budget of **US$8.9 billion**, significantly lower than the **Rmb300 billion (approx. US$41.8 billion)** allocated for 2025 [1] - The expected positive impact on corporate earnings for 2026 is anticipated to be less than in 2025 due to the reduced budget [1] - Major sectors covered include **home appliances, auto, digital consumer products, and upgrading equipment** [1] Specific Subsidy Details - **Digital and smart products** will be included in the 2026 scheme, offering a **15% rebate** on items like smartphones and smartwatches, capped at **Rmb 500** each [2] - For home appliances, a **15% subsidy** is available for six categories, capped at **Rmb 1,500** per item [2] - In the auto sector, scrapping old cars can yield subsidies of **12%** of the purchase price for new energy vehicles (NEVs), capped at **Rmb 20,000** [2] Equipment Upgrade Program - The equipment-upgrade program will expand to include sectors such as **elevators in old residential blocks, elderly-care facilities, and fire-and-rescue systems** [3] Company Insights Preferred Companies - **Shengyi Tech**, **Han's CNC**, **Shennan Circuit**, and **KB Laminate** are highlighted for their sales exposure and AI-related business opportunities [1] - **Hengli Hydraulic** is favored in the automation space due to potential re-rating linked to humanoid robots [1] Company Valuations and Risks - **Han's CNC**: Target price of **Rmb 140** based on a **50x 2026E P/E**, with a **98% earnings CAGR** expected for 2025-26E [7] - Risks include weaker AI PCB equipment demand and rising component costs [8] - **Hengli Hydraulic**: Target price of **Rmb 135** based on a **52x 2026E P/E** [9] - Risks include weaker demand for components and lower-than-expected gross profit margins [10] - **Kingboard Laminates Holdings**: Target price of **HK$20.5** based on a **19-20x P/E** for 2026E, reflecting potential earnings upgrades [11] - Risks include slower customer certification and macroeconomic conditions [12] - **Shengyi Technology**: Target price of **Rmb 83** based on a **44x 2026E P/E**, with a strong growth outlook due to AI-CCL revenue [13] - Risks include lower-than-expected demand for AI-CCL orders and subdued consumption [14] - **Shennan Circuit**: Target price of **Rmb 281** based on a **48x forward 2026E P/E**, with significant exposure to AI and auto segments [16] - Risks include slower-than-expected demand in the AI server market and higher laminate cost inflation [17] Additional Insights - The report emphasizes the importance of the **2026 subsidy program** in shaping the earnings outlook for various companies within the industrial sector [1][2][3] - The anticipated lower budget for the subsidy program may lead to a more cautious investment environment compared to 2025 [1] - Companies with strong positions in AI and digital products are expected to benefit more from the subsidy scheme [1][2]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2025 was $27.1 million, an increase of $9.7 million or 55.7% from Q3 2024 [4] - Adjusted EBITDA margins increased to 7.7%, a gain of 170 basis points [4] - Adjusted earnings per share reached $0.47, reflecting a year-over-year increase of 30.6% [4][16] - Net sales increased by 20.1% in Q3 2025, driven by strong demand for asphalt and concrete plants and the inclusion of PeraSource [15][16] Business Line Data and Key Metrics Changes - Infrastructure solutions segment saw a 17.1% increase in net sales compared to Q3 2024, with strong demand for asphalt and concrete plants [16][17] - Material solutions segment, now including PeraSource, reported a net sales increase of $30.5 million or 24.1% [17] - Part sales for the infrastructure solutions segment increased by 14.8% quarter-over-quarter [5] Market Data and Key Metrics Changes - Backlog at quarter end was $449.5 million, a sequential increase of $68.7 million, with $64.1 million attributed to PeraSource [5] - Approximately $230 billion, or 66%, of Infrastructure Investment and Jobs Act funds have been committed as of August 30, 2025 [9] - Federal transportation leaders remain optimistic about passing a new transportation bill next year, which is promising for the company [10] Company Strategy and Development Direction - The company is focused on inorganic growth, as demonstrated by the acquisition of PeraSource [8] - Ongoing infrastructure upgrades are expected to fuel stable, long-term demand for capital equipment, aftermarket parts, and digital solutions [10][22] - The company is actively managing tariff impacts through procurement strategies and pricing measures [11] Management's Comments on Operating Environment and Future Outlook - Management raised the lower end of full-year guidance from $123 million to $132 million, maintaining the upper range at $142 million [7] - Improved customer sentiment is noted due to recent interest rate movements [6] - The company anticipates growing demand for material solutions products in upcoming quarters [14] Other Important Information - The company maintains a strong balance sheet with $67.3 million in cash and cash equivalents and $244.8 million in available credit, totaling $312.1 million in liquidity [18] - Adjusted ROIC for the quarter was reported at 12.3% [6] Q&A Session Summary Question: What led to the raising of the lower end of guidance? - Management noted that gaps in capacity to fill were filled nicely, allowing for confidence in Q4 sales [23] Question: Was there a change in order rates compared to previous years? - Management observed a different booking process from customers, with a reduction in uncertainty around tariffs contributing to decision-making [24] Question: Were PeraSource margins accretive in Q3? - Management confirmed that PeraSource margins were accretive and expressed optimism about future synergy realization [25][26] Question: What is the current percentage of parts revenue per segment? - The parts sales mix increased by 670 basis points, with overall company parts revenue now around 32% [28] Question: How is the company managing tariff uncertainties? - Management stated that proactive pricing and alternative sourcing strategies have positioned the company well to mitigate tariff impacts [29] Question: Can you provide insights on parts growth within the infrastructure segment? - Management highlighted that efforts to drive parts business have started to pay off, contributing significantly to growth [30] Question: What is the status of dealer inventory for the material solutions segment? - Management indicated that dealer inventory levels are healthy, with some dealer stocking observed [32] Question: How are fill rates for PeraSource expected to improve? - Management expects PeraSource fill rates to improve significantly within the next 12 months, aligning closer to core Astec levels [35] Question: Have there been any orders related to rare earth mining? - Management confirmed receiving orders related to rare earth mining, indicating real demand and ongoing investments [37]