NARI-TECH(SH:600406)2025-08-28 02:12Summary of NARI Technology (600406.SS) 2Q25 Conference Call Company Overview - Company: NARI Technology (600406.SS) - Industry: Power Equipment and Grid Automation Key Financial Results - 2Q25 Revenue: Rmb 15,348 million, +24% YoY - Gross Profit: Rmb 4,260 million, +8% YoY - EBIT: Rmb 2,636 million, +12% YoY - Net Profit: Rmb 3,137 million, +7% YoY - Gross Margin (GPM): 28%, down 4 percentage points (pp) YoY - Operating Margin (OPM): 17%, down 2 pp YoY - Net Margin (NPM): 15%, down 2 pp YoY - 1H25 Revenue: Rmb 28,243 million, +24% YoY - 1H25 GPM: 28%, down 2.6 pp YoY Segment Performance - Grid Automation Segment: - Revenue: Rmb 12,225 million, +28% YoY in 1H25 - GPM: 30.3%, down 3 pp YoY - Grid Digitalization Segment: - Revenue: Rmb 3,900 million, +4% YoY in 1H25 - GPM: 23.4%, down 3 pp YoY - Power Generation Segment: - Revenue: Rmb 6,541 million, +30% YoY in 1H25 - GPM: 21.6%, down 2 pp YoY - Industrial Internet Segment: - Revenue: Rmb 1,245 million, +3% YoY in 1H25 - GPM: 20.0%, down 3 pp YoY - Overseas Business: - Revenue: Rmb 1,987 million, +139% YoY in 1H25 - Newly signed overseas contracts grew 200% YoY Expense Management - SG&A Expense: 13% of total revenue in 1H25, down from 14.9% in 1H24 - Cash Flow from Operations: Rmb 2,809 million in 1H25, representing 95% of net profit Investment Thesis - NARI Technology is positioned as a leading player in the power equipment sector in China, with significant market shares in various segments (34%-70%). - Expected to benefit from China's power grid modernization, with projected revenue and net profit CAGR of 10% and 12% respectively from 2025 to 2030. - Anticipated catalysts include State Grid's work plans and the upcoming 15th Five-Year Energy/Grid Plan in 2026. Valuation and Risks - 12-Month Target Price: Rmb 30.2, based on a P/E ratio of 25X for 2026E - Key Risks: - Lower-than-expected fiscal support from the State Grid - Delays in UHV project approvals Conclusion - Despite pressure on GPM, NARI Technology shows strong revenue growth and effective expense management, maintaining a positive outlook for future performance and investment potential. The company is rated as a "Buy" with significant upside potential.