Investment Rating - The investment rating for Hundsun Technologies is "Buy" with a target price of Rmb40.7, implying an expected share price return of 37.7% and a total expected return of 38.5% [6]. Core Insights - Future growth for Hundsun Technologies is anticipated to be driven by strong demand for software localization due to US-China geopolitical tensions and the deadline for state-owned enterprises to localize software [2][4]. - The management noted that while brokers experienced improved earnings in the first half of 2025 and third quarter of 2025, asset managers are under pressure due to fully implemented fee cuts and declining assets under management [2]. - An employee share compensation scheme was launched in August 2025, embedding a target of 10% growth in recurring net profit, although management did not provide guidance for 2026 revenue and net profit growth due to uncertainties in project rollout [3]. - The competitive landscape is expected to become more benign, as many listed peers reported net losses in 2024, and smaller unlisted peers may shift strategies away from rapid expansion [4]. Summary by Sections Market Outlook - The demand for software localization is robust, driven by geopolitical factors and regulatory deadlines for state-owned enterprises [2]. - Management expressed confidence in the long-term outlook, focusing on product development and innovation to navigate market downturns [4]. Financial Performance - Brokers have seen improved earnings in 1H25 and 3Q25, while asset managers face challenges due to fee cuts and declining AUM [2]. - The newly launched employee share compensation scheme targets a 10% growth in recurring net profit [3]. Competitive Landscape - The market competition is likely to become more benign, with many listed peers suffering losses and smaller players potentially changing their growth strategies [4]. Valuation - The target price of Rmb40.7 is based on a discounted cash flow (DCF) valuation, projecting free cash flows up to 2034E with a terminal growth rate of 5.5% [8].