Envicool(SZ:002837)2025-10-19 15:58Summary of Shenzhen Envicool Technology (002837.SZ) Conference Call Company Overview - Company: Shenzhen Envicool Technology - Ticker: 002837.SZ - Industry: Thermal management solutions for datacenters and energy storage systems - Established: 2005 in Shenzhen, China - Market Presence: Leading provider in China with global operations, primarily in the US and Southeast Asia [19][20] Key Financial Results - 3Q25 Revenue: Rmb1.45 billion, a 25% year-over-year increase, but a decline of 11% quarter-over-quarter from 2Q25 [1] - 9M25 Revenue: Rmb4.026 billion, a 40.2% year-over-year increase; attributed net profit rose 13% year-over-year to Rmb399 million [2] - 3Q25 Attributed Net Profit: Rmb183 million, an 8.4% year-over-year increase, slightly below expectations [1] - 4Q25 Expectations: Anticipated attributed net profit to double year-over-year to Rmb215 million, primarily due to a low base [1] Operational Insights - Operating Cash Flow (OCF): Negative Rmb319 million in 9M25 compared to positive Rmb156 million the previous year, attributed to rising raw material and labor costs [2] - Accounts Receivable (AR): Increased by 197% year-over-year to Rmb129.7 million, indicating delays in cash conversion [2] - Inventory Growth: Increased by 39% year-over-year to Rmb1.232 billion, suggesting a solid backlog but also indicating limited upside potential [3] Valuation and Market Position - Current Valuation: PE ratio of 90x for 2026E and >7x for 2027E, with a projected 3-year EPS CAGR of merely 30% until 2027E [3] - Target Price: Set at Rmb50, representing a potential downside of 32.7% from the current price of Rmb74.31 [5][9] - Market Capitalization: Rmb72.001 billion (approximately US$10.086 billion) [5] Investment Strategy - Recommendation: Sell, due to high valuation and soft 9M25 results [1][20] - Competitors: Preference for SYTECH over Shennan in the A-share AI-infra theme [1] Growth Drivers - Nvidia Supply Chain: Potential growth from partnerships with Nvidia, which has included Envicool among its datacenter infrastructure providers [21] - Huawei Supply Chain: Anticipated growth from Huawei's upcoming GPU launch, which may favor domestic players like Envicool [21] - Gross Margin Outlook: Expected improvement due to a better mix of overseas sales [21] Risks and Challenges - Market Sentiment: High risk rating for the stock, with potential upside risks including stronger-than-expected AI market sentiment and profit contributions from new GPU launches [23] - Valuation Concerns: Current valuation is seen as stretched given the company's growth outlook and market conditions [20][22] Conclusion Shenzhen Envicool Technology is positioned as a leader in the thermal management solutions sector, but faces challenges with high valuations and recent performance metrics. The company is expected to leverage growth opportunities from key partnerships while navigating operational cash flow issues and market expectations. The recommendation remains a cautious sell based on current financial performance and valuation concerns.