Summary of Guodian NARI Conference Call Company Overview - **Company**: Guodian NARI - **Industry**: Smart Grid and Energy Solutions Key Points Financial Performance - **Revenue Growth**: In the first half of 2025, Guodian NARI's revenue increased by 139%, with overseas contracts surging by 200% [2][4] - **Cash Flow Improvement**: Operating cash flow rose by over 2 billion RMB year-on-year, indicating strong financial health [2][6] - **Profitability**: Despite revenue growth, the gross margin in the smart grid segment decreased by over 2 percentage points due to the absence of high-margin projects from the previous year [2][11] Business Segments Performance - **Smart Grid Segment**: Revenue grew by 28% to approximately 12.2 billion RMB, accounting for about half of total revenue [2][16] - **Ultra-High Voltage and Flexible Transmission**: Revenue reached around 2.3 billion RMB, nearly doubling year-on-year, but faced lower margins compared to previous high-margin projects [2][14] - **Energy Low Carbon Segment**: Expected to grow over 30%, driven by new energy access, with wind power nearly doubling and solar and storage increasing by over 20% [2][23] Strategic Initiatives - **International Expansion**: The company aims to achieve over 10 billion RMB in overseas revenue by 2030, currently maintaining a gross margin of about 20% in overseas operations [3][36] - **Technological Innovation**: Focus on upgrading technology to meet challenges in energy transition and digital transformation, with plans to establish multiple model teams for research and development [5][9] - **Market Diversification**: The company is actively expanding into new markets, with a notable increase in contracts outside traditional systems [5][10] Future Outlook - **Growth Projections**: For 2025, the company anticipates a 15% growth in the smart grid segment, 5% in digital energy integration, over 30% in energy low carbon, and close to 10% in industrial interconnection [2][21] - **Investment in R&D**: The company plans to maintain a focus on R&D while controlling non-productive expenses, ensuring that expense growth remains below revenue growth [26] Investor Relations - **Dividend Policy**: The average dividend payout ratio has exceeded 45%, with recent increases bringing it close to 60%. The 2024 dividend yield is approximately 2.5% [7][20] - **Commitment to Shareholder Returns**: The company emphasizes a stable and attractive dividend strategy to reward investors [32] Additional Insights - **Emerging Technologies**: The company is exploring blockchain technology applications in its energy solutions and has made progress in high-voltage IGBT products for grid applications [35][37] - **Market Conditions**: The competitive landscape in the electromechanical protection market has led to price declines, impacting gross margins [13] This summary encapsulates the key insights from Guodian NARI's conference call, highlighting its financial performance, strategic initiatives, and future outlook in the smart grid and energy solutions industry.

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [5] Core Views - The company has maintained a high operating rate in Q2 2025, with a continuous expansion of its product matrix [5] - The semiconductor market is experiencing a mild recovery, contributing to the company's revenue growth [6] - The company is actively expanding production and maintaining high capacity utilization while implementing cost reduction and efficiency improvement measures [6] Financial Performance - In H1 2025, the company achieved revenue of 5.218 billion yuan, a year-on-year increase of 9.62% [6] - The net profit attributable to the parent company for H1 2025 was 339 million yuan, up 20.85% year-on-year [6] - For Q2 2025, revenue reached 2.863 billion yuan, representing an 8.28% year-on-year increase and a 21.61% quarter-on-quarter increase [6] - The net profit attributable to the parent company in Q2 2025 was 256 million yuan, a 3.42% year-on-year increase and a 207.12% quarter-on-quarter increase [6] Product and Market Development - The product matrix is continuously enriched, with significant contributions from various sectors: 44% from the new energy sector, 38% from consumer electronics, and 9% each from industrial equipment and communication devices [6] - The company's MOSFET products are expanding in automotive electronics, industrial control, and AI server markets, with rapid market adoption of the latest generation products [6] - The sales of IGBT products in industrial control and automotive electronics account for over 70% of total sales, with stable supply to leading customers [6] - Sales of third-generation wide bandgap semiconductors, including silicon carbide and gallium nitride devices, have seen rapid growth [6] Manufacturing and Services - The advanced technology platform continues to develop, with significant revenue contributions from wafer manufacturing and packaging testing segments [6] - The company has achieved risk production for multiple technology platforms, including 0.11μm ULL e-Flash and 0.15μm DB BCD [6] - The packaging business has seen a substantial increase in capacity utilization, with a year-on-year growth of 27% [6] Earnings Forecast and Valuation - The company is expected to achieve net profits of 959 million yuan, 1.205 billion yuan, and 1.650 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 25.80%, 25.63%, and 36.91% [6] - The current price-to-earnings (P/E) ratios are projected to be 72, 58, and 42 for the years 2025, 2026, and 2027 respectively [6]

Investment Rating - The report maintains a "Buy-A" investment rating for the company, with a target price of 70.49 CNY for the next six months [4][6]. Core Views - The company reported a revenue of 3.455 billion CNY for the first half of 2025, representing a year-on-year growth of 20.58%, and a net profit of 601 million CNY, which is a 41.55% increase compared to the same period last year [1][4]. - The expansion of industry demand and the acceleration of domestic production are driving the company's steady performance. The domestic market is stimulated by policies such as the old-for-new exchange, while sectors like automotive electronics and AI are contributing to new growth [2][3]. - The company is one of the few large-scale enterprises in China that integrates the entire vertical supply chain from monocrystalline silicon wafer manufacturing to terminal sales and services. It is increasing its investment in third-generation semiconductor chips, particularly SiC power devices, and has established partnerships with several Tier 1 automotive clients [3][4]. Financial Summary - The projected revenues for the company from 2025 to 2027 are 7.421 billion CNY, 8.905 billion CNY, and 10.686 billion CNY, respectively. The expected net profits for the same period are 1.276 billion CNY, 1.493 billion CNY, and 1.748 billion CNY [4][10]. - The company is expected to achieve a PE ratio of 30 times in 2025, which corresponds to the target price of 70.49 CNY [4][10]. - The company's net profit margin is projected to be 17.2% in 2025, with a return on equity (ROE) of 13.2% [10][11].

Industry Overview - The advanced rail transit industry is experiencing significant growth, with a projected fixed asset investment of 850.6 billion yuan in 2024, representing an 11.3% year-on-year increase [1] - By 2025, the national railway aims to complete infrastructure investments of 590 billion yuan and add 2,600 kilometers of new lines, with total railway operating mileage expected to reach approximately 180,000 kilometers by 2030 [2] Company Developments - Times Electric is focusing on the development of power semiconductor devices, breaking the foreign monopoly in core components for rail transit and ultra-high voltage transmission [3] - The company is set to launch its third-phase silicon carbide (SiC) production line in Zhuzhou by the end of 2025, with a focus on automotive-grade SiC modules for electric vehicles [3][4] - Times Electric's SiC products are positioned for various applications, including electric vehicles, UPS, wind power generation, and smart grids, with expectations for significant growth in shipments by 2025 [4] Strategic Initiatives - Iron Science Rail aims to align with national railway construction demands, focusing on high-speed rail fasteners and expanding into new products and technologies for urban rail systems [5][6] - The company is committed to enhancing its profitability and market presence by promoting product marketing and advancing integrated research and development [5][6] - Sanwang Communication plans to deepen its focus on industrial railway signal control and intelligent scheduling, leveraging AI and IoT technologies to address customer needs and drive growth [6]