Summary of Shenzhen Kstar Science & Tech (002518.SZ) Conference Call Company Overview - **Company**: Shenzhen Kstar Science & Tech (002518.SZ) - **Industry**: Electric power conversion technology, focusing on data centers and energy storage systems (ESS) Key Financial Highlights - **2Q25 Results**: - Revenue: Rmb1,219 million, +15% YoY - Gross Profit: Rmb350 million, +7% YoY - EBIT: Rmb141 million, +82% YoY - Net Profit: Rmb144 million, +70% YoY - Gross Margin: 29%, -2pp YoY - Operating Margin: 12%, +4pp YoY - Net Profit Margin: 12%, +4pp YoY - **Comparison to Guidance**: Results were largely in line with expectations, with slight deviations in gross profit and net profit compared to guidance estimates [1][21] Growth Projections - **Revenue Growth**: - Targeting 15%-20% sales growth in the data center segment for full-year 2025, implying 21%-30% growth in 2H25 [2] - Revised 2025E-2030E net profit estimates increased by 7% on average due to solid data center demand and overseas expansion potential [19] - **Price Target**: Updated 12-month price target raised to Rmb35.3 from Rmb30.9, based on a higher target multiple reflecting improved growth and return profiles [19] Segment Performance - **Data Center Products**: - Sales in 1H25: Rmb1,329 million, +8% YoY - Significant order growth (>20% YoY) expected in 2Q25, with many orders scheduled for delivery in 2H25 [2] - **Energy Storage Systems (ESS)**: - Sales in 1H25: Rmb265 million, +80% YoY - Targeting to double ESS sales growth in full-year 2025 [17] - **Solar Inverters**: - Sales in 1H25: Rmb450 million, +5% YoY - Anticipated domestic demand headwinds in 2H25, but low profitability expected to limit impact on overall earnings [18] Market Expansion and Strategic Initiatives - **Overseas Markets**: Contributed approximately 55% of segment sales in 1H25, primarily driven by Southeast Asia and Europe [2] - **New Partnerships**: Collaborating with a UPS brand for potential ODM business targeting high-power UPS products for AI data centers in North America [2] - **Domestic Market**: Domestic sales accounted for about 45% of segment sales in 1H25, with key customers including Alibaba and Bytedance [20] Risks and Challenges - **Downside Risks**: - Lower-than-expected data center revenue growth - Lower-than-expected new energy revenue outlook - Lower-than-expected new energy margins [19][23] Conclusion - **Investment Rating**: Maintain Buy rating based on attractive P/E valuation and long-term growth potential [19][22] - **Future Outlook**: Positive growth outlook driven by data center demand, overseas expansion, and recovery in new energy business, with a focus on improving margins and profitability [22]