Summary of Zhejiang Supcon Technology Co. (688777.SS) Conference Call Company Overview - **Company**: Zhejiang Supcon Technology Co. - **Ticker**: 688777.SS - **Market Cap**: Rmb42.1 billion / $5.9 billion - **Industry**: Process Automation (PA) and Industrial AI Key Takeaways Industry and Market Position - Supcon is the leading supplier of Distributed Control Systems (DCS) in China, holding the No.1 market share in 2024, competing with global peers like Emerson, Honeywell, and Yokogawa, as well as domestic competitors like Hollysys [6][7] - The company derives 57% of its total sales from the (petro)chemicals industry, which is currently facing a challenging capital expenditure (capex) outlook [6][7] Transition to Industrial AI - Supcon is actively transitioning to an industrial AI company, focusing on scaling up investments in AI, including R&D, product development, and sales [1][2] - The transition is expected to take 3 to 5 years, with a shift towards subscription-based software and AI products [2][6] Product Innovations - **TPT 2.0**: Launched in late August 2025, this SaaS platform has seen user growth of approximately 100 new users per day. It features a Mixture of Experts (MoE) architecture aimed at optimizing production processes and ensuring safety [4] - **Robotics Solutions**: Supcon showcased various robotics solutions, including inspection and quadruped robots. In the first half of 2025, robotics solutions generated Rmb110 million in sales, accounting for 3% of total sales, with a gross profit margin of 12% [4] Financial Performance and Outlook - The financial performance in the near term is expected to remain under pressure due to the weak domestic chemicals capex outlook [2][6] - The company plans to start charging subscription fees for TPT 2.0 after 2 to 3 months post-launch, although many customers are still accustomed to one-off sales models [4] Investment Thesis and Risks - The investment thesis holds a neutral view on Supcon's stock due to the domestic chemicals capex weakness, despite the company's strong market position and new initiatives [6][7] - The 12-month price target is set at Rmb40.4, representing a downside of 24.1% from the current price of Rmb53.20 [8] - Key risks include contributions from new initiatives, progress in overseas expansion, and potential gains in the domestic DCS market share [7] Financial Projections - Revenue projections for the upcoming years are as follows: - 2024: Rmb9,138.5 million - 2025E: Rmb8,404.9 million - 2026E: Rmb9,125.3 million - 2027E: Rmb10,128.3 million [8] Additional Insights - The company is increasing its allocation of resources towards AI applications, indicating a strategic pivot in its business model [1] - The robotics segment, while currently small, shows potential for growth as the company continues to innovate and expand its offerings [4] This summary encapsulates the critical insights from the conference call regarding Zhejiang Supcon Technology Co., highlighting its strategic direction, market challenges, and financial outlook.