Market conditions continue to be a slog for Hurco ( HURC ), as this small manufacturer of machine tools for largely small/mid-sized manufacturing customers continues to see weak demand amid significant uncertainty and caution among its customers. Although there are some signsAnalyst’s Disclosure:I/we have a beneficial long position in the shares of HURC, MSM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compen ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Manufacturing and Industrial Automation in China - **Key Indicators**: Manufacturing Fixed Asset Investment (FAI) and production metrics for various sectors Core Insights 1. **Manufacturing FAI Decline**: Manufacturing FAI decreased by **-2.0% year-on-year (yoy)** in August, a significant drop from **-0.2% yoy** in July, primarily due to declines in electronics and basic materials FAI [3][51] 2. **Chemical and Steel FAI**: Chemical FAI was reported at **-5.2% yoy** and steel FAI at **-4.1% yoy**, negatively impacting companies like Supcon and Baosight [3][24][26] 3. **Industrial Robot and Machine Tool Production**: Industrial robot production increased by **14% yoy** but remained flat month-on-month (mom). Machine tool production rose by **16% yoy**, also flat mom, indicating a stable production environment [3][40] 4. **Export Trends**: Key equipment exports remained stable, with PIMM export value and volume increasing by **24% yoy** and **34% yoy**, respectively. Machine tools saw a value increase of **19% yoy** but a volume decrease of **20% yoy** [4][29][34] 5. **Order Trends for Coverage Companies**: Orders for coverage companies were broadly steady in August, with notable growth in Inovance's IA orders at **+20-30% yoy**. However, Yiheda's orders were impacted by a **-12% yoy** decline in the automotive sector [4][20][11] Additional Important Insights 1. **Capex Financing Weakness**: Capex financing showed a **-12% yoy** decline in August, following a drastic **-96% yoy** drop in July, indicating a tightening investment environment [64] 2. **Profitability Metrics**: The profit before tax (PBT) margin for industrial enterprises with revenue over **Rmb20 million** was **5.5%** in Q2 2025, slightly down from **5.6%** in Q1 2025 [71] 3. **Electricity and Cement Production**: Electricity generation increased by **3.2% yoy** in August, while cement production saw a decline of **-6.2% yoy** [81][88] 4. **Consumer Market Trends**: Passenger vehicle retail sales and production increased by **5%** and **11% yoy**, respectively, indicating a recovery in the automotive sector [90] 5. **NEV and Renewables**: Electric vehicle (EV) sales and production surged by **27% yoy** in August, reflecting strong demand in the new energy vehicle market [107] Conclusion The manufacturing sector in China is experiencing a mixed environment with declining FAI, stable production metrics, and selective strength in orders. The overall economic backdrop remains challenging, with significant declines in capex financing and profitability metrics, while certain sectors like EVs show robust growth.

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **China Industrial Indicators**, focusing on the manufacturing sector and related industries such as machine tools and industrial robots [1][3][38]. Core Insights and Arguments - **Manufacturing Fixed Asset Investment (FAI)**: - Manufacturing FAI decreased by **-0.2% year-over-year (yoy)** in July, a significant drop from **+5.6% yoy** in June, largely due to declines in energy, chemical, and basic material investments [3][49]. - The **July manufacturing PMI** was reported at **49.3**, slightly down from **49.7** in June, indicating a contraction in manufacturing activity [45][52]. - **Machine Tool Production**: - Machine tool production volumes increased by **+20% yoy** in July, with a month-over-month (mom) change of **+0%**, contrasting with a historical seasonal decline of **-8% mom** [1][38]. - Exports of machine tools showed a mixed performance, with export value at **+18% yoy** but volume down **-8% yoy** in June [32]. - **Industrial Robots**: - Production of industrial robots rose by **+24% yoy** in June, although it experienced a **-15% mom** decline [40]. - **Order Trends**: - Among 32 covered companies, order trends were stable but varied significantly; six companies saw improvements while six experienced growth moderation, particularly in battery and electronics sectors [3][8]. - Notable performers included **Inovance**, which reported a **+20% yoy** increase in July orders, attributed to company-specific factors rather than market-wide demand [3][19]. - **Sector Preferences**: - The report suggests a preference for a **Defensive + AI** investment strategy amid slowing manufacturing capital expenditures, recommending stocks like **Nari Tech**, **AVIC Jonhon**, and **CRRC H** for defensive plays, while highlighting **Sanhua H/A** and **Kstar** in the humanoid robot and AIDC sectors [3][7]. Additional Important Insights - **Capex Financing**: - Capex financing saw a dramatic decline of **-96% yoy** and **-99% mom** in July, contrasting sharply with a **+2% yoy** increase in June [61]. - **Profitability Metrics**: - The profit before tax (PBT) margin for industrial enterprises with revenue over **Rmb20 million** was **5.5%** in Q2 2025, slightly down from **5.6%** in Q1 2025 [68]. - Return on equity (ROE) improved to **8.7%** in Q2 2025 from **8.4%** in Q1 2025 [70]. - **Electricity and Production Trends**: - Electricity generation increased by **+4.9% yoy** in July, while steel production decreased by **-1.4% yoy** [78][81]. - Cement production also saw a decline of **-5.6% yoy** in July [85]. - **Consumer Trends**: - Passenger vehicle retail sales and production increased by **+6%** and **+12% yoy**, respectively, indicating a recovery in the automotive sector [87]. This summary encapsulates the critical insights from the conference call, highlighting the current state of the manufacturing sector in China, key performance indicators, and investment recommendations.