Equity Research: Hengdian Group DMEGC Magnetics Co., Ltd. (002056.SZ)

Date: August 21, 2025
Rating: BUY (Maintained)
Current Price: CNY 17.43
Target Price: Implied Upside based on 15x 2025E P/E
Sector: New Energy & Power Equipment / Magnetic Materials
Analysts: Yao Yao, Zhang Jiawen (Guojin Securities)

Executive Summary

Hengdian Group DMEGC Magnetics Co., Ltd. ("DMEGC" or the "Company") has demonstrated robust operational resilience and superior profitability in its 1H 2025 results, effectively navigating a challenging macroeconomic and industry landscape. On August 20, 2025, the Company disclosed its interim report for the first half of 2025, revealing a significant acceleration in both top-line growth and bottom-line profitability. Total revenue reached CNY 11.94 billion, representing a year-over-year (YoY) increase of 24.8%, while net profit attributable to shareholders amounted to CNY 1.02 billion, surging 58.9% YoY. Notably, the second quarter (Q2) exhibited strong momentum, with revenue rising 25.9% YoY and 28.6% quarter-over-quarter (QoQ), and net profit jumping 94.8% YoY and 22.7% QoQ.

The core investment thesis for DMEGC rests on its successful execution of a differentiation strategy across its three primary business pillars: Photovoltaics (PV), Magnetic Materials, and Lithium Batteries. Amidst intense price competition and declining supply chain costs in the global PV sector, DMEGC’s proactive overseas capacity deployment and focus on high-efficiency, specialized products have allowed it to achieve full production utilization and expand gross margins. Simultaneously, its legacy magnetic materials business continues to consolidate its market leadership through expansion into high-growth sectors such as New Energy Vehicles (NEVs) and AI servers. The lithium battery segment, focused on small-power applications, has also seen improved operating rates and margin recovery.

We maintain our BUY rating on DMEGC. We have slightly adjusted our earnings forecasts for 2025-2027 to CNY 1.92 billion, CNY 2.19 billion, and CNY 2.50 billion, respectively. At the current share price of CNY 17.43, the stock trades at attractive valuations of approximately 15x, 13x, and 11x Forward P/E for 2025, 2026, and 2027, respectively. The Company’s ability to generate consistent cash flows, coupled with its strategic moat in overseas manufacturing and product differentiation, positions it well to outperform peers in a consolidating industry.

Key Takeaways

1. Financial Performance: Accelerated Growth and Margin Expansion

The 1H 2025 financial results underscore DMEGC’s ability to convert revenue growth into substantial profit expansion, driven by operational efficiency and favorable product mix shifts.

• Top-Line Growth: Revenue of CNY 11.94 billion in 1H 2025 marks a 24.8% YoY increase. This growth was broad-based but primarily led by the PV segment. The Q2 revenue of CNY 6.71 billion not only grew 25.9% YoY but also accelerated sequentially by 28.6% from Q1, indicating strengthening demand and execution capabilities.
• Profitability Surge: Net profit attributable to shareholders reached CNY 1.02 billion in 1H 2025, up 58.9% YoY. The profit growth significantly outpaced revenue growth, highlighting improved operating leverage and margin expansion. Q2 net profit of CNY 562 million represented a remarkable 94.8% YoY increase and a 22.7% QoQ increase.
• Margin Dynamics: The divergence between revenue growth and profit growth is largely attributed to the PV segment’s margin improvement. Despite a general decline in industry-wide module and cell prices, DMEGC’s gross margin in PV expanded by 5.3 percentage points (PCT) YoY to 16.7%. This counter-cyclical margin expansion is a testament to the Company’s cost control and premium product positioning.

(Note: 1H 2024 figures derived from reported growth rates)

2. Photovoltaic (PV) Segment: Overseas Capacity as a Strategic Moat

The PV segment remains the primary growth engine and profit driver for DMEGC. In 1H 2025, PV revenue totaled CNY 8.05 billion, up 36.58% YoY, with shipments reaching 13.4 GW, a surge of over 65% YoY.

A. The "Overseas Advantage" in a Protectionist Era

The global PV industry is currently characterized by severe overcapacity in China and rising trade barriers in key markets such as the United States and Europe. DMEGC’s forward-looking strategy of establishing overseas production capacities has proven to be a critical competitive advantage.

• Full Utilization & Premium Pricing: While domestic competitors face inventory backlogs and price wars, DMEGC’s overseas facilities operated at full capacity during 1H 2025. This allowed the Company to bypass certain trade tariffs and access higher-margin markets. The ability to deliver products directly from overseas hubs enhances supply chain security for international clients, justifying a pricing premium.
• Execution Flexibility: The Company’s extensive experience in cross-border operations and its agile expansion capabilities enable it to respond quickly to shifting geopolitical landscapes. This "re-globalization" strategy is not merely about avoiding tariffs but about embedding itself into local supply chains, thereby deepening customer stickiness.

B. Product Differentiation and Technological Leadership

DMEGC is actively moving away from commoditized standard modules towards high-value, differentiated products.

• Product Portfolio: The Company has launched 5 categories of double-glass standard products and 9 categories of products for special application scenarios. These specialized products are designed for diverse environments (e.g., high-humidity, high-salinity, or building-integrated PV), where performance and durability command higher margins.
• Efficiency Breakthroughs: Technological innovation remains central to its strategy. The mass production conversion efficiency of its solar cells has reached 26.85%, while R&D efficiencies have hit 27.25%. These figures place DMEGC at the forefront of the industry, particularly in N-type technology transitions.
• High-Power Modules: The Company has achieved phased results in ultra-high-power product development. As the industry trends towards larger wattage modules to reduce Balance of System (BOS) costs, DMEGC’s readiness in this area ensures its products remain competitive in utility-scale projects.

C. Profitability Resilience

The combination of overseas sales (higher ASPs) and high-efficiency products (lower cost per watt) resulted in a PV gross margin of 16.7% in 1H 2025, a significant 5.3 PCT improvement YoY. This margin expansion occurred against a backdrop of falling raw material (polysilicon, wafer) prices, indicating that the Company is retaining a fair share of the cost savings while passing on value to customers through quality and reliability.

3. Magnetic Materials Segment: Consolidating Leadership in High-Growth Niches

The magnetic materials business, DMEGC’s foundational pillar, continues to demonstrate stability and steady growth, leveraging its scale and technological prowess to capture emerging opportunities.

• Financial Performance: Revenue from magnetic devices reached CNY 2.37 billion in 1H 2025, an 8% YoY increase. Shipment volume stood at 107,300 tons. More importantly, the gross margin improved by 1.2 PCT YoY to 27.7%, reflecting a shift towards higher-value applications.
• Market Position: DMEGC remains the global leader in ferrite magnetic materials. Its comprehensive advantages in technology, scale, and customer relationships have further solidified its market share. In a fragmented market, DMEGC’s scale allows for superior cost control and R&D amortization.
• Structural Growth Drivers:
  • New Energy Vehicles (NEVs): The electrification of automobiles requires significant amounts of high-performance soft magnets for motors, inverters, and onboard chargers. DMEGC has successfully penetrated this supply chain, benefiting from the global EV boom.
  • AI Servers & Data Centers: The rapid expansion of Artificial Intelligence infrastructure has spurred demand for high-frequency, low-loss magnetic components in power supplies and transformers for servers. DMEGC’s recent breakthroughs in this sector represent a high-margin growth avenue that offsets slower growth in traditional consumer electronics.
• Optimization of Shipment Structure: The improvement in gross margin is directly linked to the optimization of the product mix. By reducing reliance on low-end commoditized magnets and increasing the proportion of automotive and industrial-grade products, DMEGC has enhanced the overall profitability of this segment.

4. Lithium Battery Segment: Focused Strategy on Small Power Applications

DMEGC’s lithium battery business adopts a niche strategy, focusing on "small power" applications rather than competing head-on with giants in the large-scale energy storage or passenger EV battery markets.

• Financial Performance: Revenue from the lithium segment was CNY 1.29 billion in 1H 2025, up 4% YoY. Shipments exceeded 300 million units, a 12.25% YoY increase. The gross margin recovered to 12.9%, driven by improved operating rates and cost optimization.
• Operational Efficiency: The Company maintained industry-leading capacity utilization rates ("稼动率") in 1H 2025. High utilization is critical in battery manufacturing to spread fixed costs. Through product iteration and stringent quality control, DMEGC has optimized its manufacturing costs, leading to the margin recovery.
• Product Innovation:
  • New Product Launches: The Company introduced several new high-capacity E-type and P-type cylindrical batteries. These formats are widely used in power tools, electric bicycles, and portable energy storage devices.
  • All-Tab Technology: DMEGC has completed technical reserves for all-tab (tabless) battery products. This technology reduces internal resistance and improves heat dissipation, enhancing safety and charging speeds. This positions the Company well for next-generation small-power applications where performance density is key.
• Strategic Fit: By focusing on small power, DMEGC avoids the brutal price wars seen in the mainstream EV battery sector. The small power market is characterized by higher customization requirements and stricter quality standards, creating higher entry barriers and more stable margins.

5. Earnings Forecast and Valuation

Based on the strong 1H 2025 performance and our assessment of the Company’s competitive positioning, we have updated our financial models.

Revised Earnings Estimates

We adjust our net profit forecasts for 2025-2027 to reflect the stronger-than-expected margin trajectory in the PV segment and the steady growth in magnetics.

Note: The slight deceleration in revenue growth expected in 2026-2027 reflects a normalization after the significant jump in 2025 driven by overseas capacity ramp-up. However, profit growth accelerates due to ongoing efficiency gains and product mix improvements.

Valuation Analysis

At the current share price of CNY 17.43:

• 2025E P/E: ~14.8x (Using forecast EPS of 1.18)
• 2026E P/E: ~12.9x (Using forecast EPS of 1.35)
• 2027E P/E: ~11.3x (Using forecast EPS of 1.54)

Comparative Valuation Context:
The renewable energy and magnetic materials sectors have undergone significant valuation compression over the past two years due to concerns over overcapacity and margin erosion. However, DMEGC’s valuation multiple is justified by:
1. Superior Profitability: Its ability to expand margins in a deflationary price environment distinguishes it from peers.
2. Growth Visibility: The overseas capacity provides a clearer visibility on volume and price stability compared to purely domestic players.
3. Diversification: Unlike pure-play PV companies, DMEGC’s earnings are buffered by the stable cash flows from the magnetic materials business.

We believe the current valuation does not fully reflect the sustainability of its overseas premium and the optionality from its AI/NEV magnetic exposure. A target P/E of 15-18x for 2025 earnings would be reasonable given its growth profile and risk-adjusted returns, implying potential upside from current levels.

Risks / Headwinds

While DMEGC exhibits strong fundamentals, investors must consider the following risks that could impact future performance:

1. Deterioration of International Trade Environment

• Tariff Escalation: The Company’s PV profitability is heavily reliant on its overseas capacity to serve markets like the US and Europe. Any new, punitive tariffs specifically targeting Southeast Asian or other overseas manufacturing hubs (where DMEGC may have operations or supply chains) could erode the price advantage.
• Non-Tariff Barriers: Increasingly stringent environmental, social, and governance (ESG) requirements, or supply chain tracing laws (e.g., UFLPA in the US), could lead to delays or exclusions if compliance is not meticulously managed.
• Geopolitical Tensions: Broader geopolitical friction between China and Western economies could lead to decoupling pressures, affecting long-term demand visibility for Chinese-owned manufacturing assets abroad.

2. Intensifying Competition in the PV Industry

• Price Wars: Although DMEGC has managed margins well so far, the global PV industry faces structural overcapacity. If major competitors engage in aggressive price cutting to clear inventory, it could force DMEGC to lower prices, compressing margins despite its differentiation.
• Technological Disruption: The PV industry is rapidly transitioning from P-type to N-type (TOPCon, HJT, BC) technologies. While DMEGC is currently efficient at 26.85%, any failure to keep pace with the next generation of cell technologies (e.g., perovskite tandem cells) could render its current capacity obsolete faster than anticipated.
• Overseas Capacity Replication: Competitors are also accelerating overseas expansion. If the market becomes flooded with non-Chinese or other Chinese overseas capacity, the scarcity premium DMEGC currently enjoys may diminish.

3. Demand Uncertainty

• Global Macro Slowdown: A recession in key markets (Europe, US) could reduce investment in renewable energy projects and slow down consumer spending on NEVs and power tools, impacting demand across all three business segments.
• Policy Shifts: Subsidy reductions or changes in renewable energy mandates in key markets could dampen short-term demand for PV installations.

4. Raw Material Price Volatility

• Lithium and Nickel: For the lithium battery segment, fluctuations in raw material prices can impact costs. While DMEGC focuses on small power, significant spikes in lithium carbonate prices could squeeze margins if pass-through to customers is delayed.
• Rare Earths and Metals: The magnetic materials segment relies on various metal inputs. Price volatility in these commodities can affect input costs, although DMEGC’s scale allows for some hedging capability.

5. Execution Risk in Overseas Expansion

• Management Complexity: Managing cross-border operations involves cultural, legal, and logistical challenges. Any misstep in labor relations, regulatory compliance, or supply chain logistics in overseas factories could disrupt production and impact profitability.
• Capital Expenditure: Continued expansion requires significant CAPEX. If returns on invested capital (ROIC) fall below expectations due to lower-than-anticipated utilization or pricing, it could drag on overall shareholder returns.

Rating / Sector Outlook

Sector Outlook: Differentiation is Key to Survival

The broader New Energy and Power Equipment sector is undergoing a profound consolidation phase. The era of easy growth driven by subsidies and unchecked demand is over. We are now in a phase of "Quality Growth" where only companies with distinct competitive advantages will thrive.

• PV Sector: The industry is shifting from a "volume-driven" to a "profit-driven" mindset. Companies with integrated supply chains, overseas manufacturing footprints, and proprietary high-efficiency technologies will capture the majority of industry profits. Pure-play manufacturers without these moats face existential threats. DMEGC is well-positioned in the former category.
• Magnetic Materials: This sector is benefiting from the secular trends of electrification and digitalization. Demand is robust, but the value is migrating towards high-performance, customized solutions. Leaders like DMEGC that can pivot quickly to serve AI and EV markets are likely to see multiple re-rating.
• Lithium Batteries: The small-power segment offers a safer haven compared to the volatile large-format battery market. It is less cyclical and more dependent on consumer innovation cycles (e.g., new power tool platforms, e-bike models).

Investment Rating: BUY (Maintained)

We reaffirm our BUY rating on DMEGC (002056.SZ).

• Rationale: The Company has successfully navigated the industry downturn by leveraging its overseas capacity and product differentiation. The 1H 2025 results confirm that this strategy is working, delivering robust profit growth despite challenging industry conditions.
• Valuation Appeal: Trading at ~15x 2025E P/E, the stock offers an attractive entry point for a company with double-digit earnings growth potential and a strong balance sheet.
• Catalysts:
  1. Continued margin expansion in PV as overseas capacity ramps up further.
  2. Breakthrough orders in AI server magnetic components.
  3. Successful commercialization of all-tab lithium batteries.
  4. Potential dividend increases given strong cash flow generation.

Investment View

Core Investment Logic

1. The "Overseas Alpha" in a Domestic Beta Market
The most compelling argument for investing in DMEGC is its exposure to overseas markets through local production. While the domestic Chinese PV market is grappling with severe oversupply and negative margins for many players, DMEGC’s overseas operations are profitable and running at full capacity. This geographic arbitrage provides a unique "alpha" source of earnings that is uncorrelated with the domestic beta. As trade barriers rise, this asset becomes increasingly valuable and scarce. Investors should view DMEGC not just as a Chinese manufacturer, but as a global supplier with a diversified production base.

2. Counter-Cyclical Margin Expansion
Typically, in a down-cycle, margins compress. DMEGC’s ability to expand its PV gross margin by 5.3 PCT in 1H 2025 is a powerful signal of operational excellence. This is driven by two factors:
* Cost Leadership: Efficient manufacturing and scale.
* Product Mix: Selling higher-efficiency, specialized modules that command a premium.
This demonstrates that DMEGC is not a commodity producer but a technology-led solutions provider. This quality commands a higher valuation multiple than pure commodity players.

3. Diversified Revenue Streams Reducing Volatility
Unlike pure-play solar companies, DMEGC’s earnings are supported by the magnetic materials business, which provides stable cash flows and high margins (27.7%). This diversification acts as a shock absorber during PV downturns. Furthermore, the lithium battery segment, though smaller, adds another layer of diversification into the consumer/industrial small-power space. This tripartite structure makes DMEGC a lower-risk play within the volatile new energy sector.

4. Technological Moat in Magnetics and PV
* Magnetics: The shift towards AI and EVs requires advanced magnetic materials. DMEGC’s R&D capabilities allow it to stay ahead of the curve, securing long-term contracts with tier-1 automotive and tech clients.
* PV: With cell efficiencies nearing 27%, DMEGC is at the technological frontier. This ensures that its products remain relevant and desirable even as older technologies become obsolete.

Strategic Implications for Institutional Investors

For institutional portfolios, DMEGC offers a balanced exposure to the green energy transition with mitigated downside risk.

• Long-Term Hold: Given the multi-year trend of global electrification and the Company’s strategic positioning, DMEGC is suitable as a core long-term holding in the renewables/industrials sector.
• Hedge Against Trade War Narratives: While trade tensions are a risk, DMEGC’s existing overseas footprint makes it one of the best-hedged Chinese companies against tariff shocks. It is a "pick-and-shovel" play on global renewable adoption, regardless of where the panels are installed.
• Income Potential: With strong cash flows and a reasonable payout ratio, DMEGC has the potential to become a consistent dividend payer, adding to total return.

Detailed Business Segment Analysis & Future Outlook

Photovoltaics: The Growth Engine

• Short-Term (6-12 months): Expect continued strong shipment growth as overseas capacity fully ramps. Margins should remain stable or improve slightly as high-efficiency products make up a larger share of sales. Watch for any changes in US/EU trade policy as a key variable.
• Medium-Term (1-3 years): The focus will shift to maintaining technological leadership. Success in ultra-high-power modules and potentially perovskite integration will be key. The Company may explore further overseas expansions in other regions (e.g., Middle East, South America) to diversify geopolitical risk.
• Key Metric to Watch: Overseas shipment % and Average Selling Price (ASP) differential between domestic and overseas markets.

Magnetic Materials: The Cash Cow

• Short-Term (6-12 months): Steady growth driven by NEV and AI server demand. Margins should remain robust above 27%.
• Medium-Term (1-3 years): Potential for market share gains as smaller competitors exit due to cost pressures. Expansion into new magnetic applications (e.g., wireless charging, robotics) could open new revenue streams.
• Key Metric to Watch: Revenue growth from AI/Server-related magnetic products and NEV-specific magnets.

Lithium Batteries: The Niche Player

• Short-Term (6-12 months): Focus on maintaining high utilization and margin recovery. Introduction of new E/P type products should drive volume.
• Medium-Term (1-3 years): Scaling up all-tab technology production. Potential for partnerships with major power tool or e-bike manufacturers.
• Key Metric to Watch: Gross margin stability and shipment volume growth in high-capacity segments.

Financial Health and Capital Allocation

DMEGC maintains a healthy balance sheet, which provides flexibility for future investments and resilience against downturns.

• Cash Flow: Operating cash flow has been strong, supporting CAPEX needs without excessive debt accumulation. The forecasted operating cash flow for 2025-2027 remains robust, indicating self-sustaining growth.
• Debt Levels: The Company’s debt-to-equity ratio is manageable. The net cash position (negative net debt) provides a buffer against interest rate hikes and financing tightness.
• CAPEX Discipline: While CAPEX remains significant to support expansion, it is targeted towards high-return overseas projects and R&D. This disciplined approach ensures that growth is accretive to shareholder value.

Conclusion

Hengdian Group DMEGC Magnetics Co., Ltd. stands out as a beacon of resilience and strategic foresight in the turbulent new energy landscape. Its 1H 2025 results are not just a beat on numbers; they are a validation of its long-term strategy: globalize production, differentiate products, and diversify applications.

For institutional investors, DMEGC offers a rare combination of growth, profitability, and relative safety. The market has yet to fully price in the sustainability of its overseas margins and the optionality of its magnetic materials business in the AI era. We believe the current valuation provides an attractive risk-reward profile.

Recommendation: Accumulate on weakness. Maintain BUY rating with a positive outlook for the next 12-18 months.

Appendix: Detailed Financial Analysis

1. Income Statement Trends

The income statement reveals a improving quality of earnings.

• Revenue Quality: The 21.26% projected revenue growth for 2025 is driven by volume (PV shipments) and price stability in overseas markets, rather than inflationary price hikes. This suggests sustainable demand.
• Cost Control: Cost of Goods Sold (COGS) as a percentage of revenue is expected to stabilize around 81-82%. The ability to keep COGS flat while revenue grows indicates economies of scale and better procurement power.
• Operating Expenses:
  • R&D: R&D expenses are projected to decrease as a percentage of sales (from 3.9% in 2024 to 2.2% in 2025E). This is likely due to the scaling of revenue rather than a cut in absolute R&D spend. Absolute R&D spend remains high, ensuring technological competitiveness.
  • Selling & Admin: These expenses are well-controlled, growing slower than revenue, which contributes to operating leverage.
• Net Margin: Net margin is projected to expand from 9.8% in 2024 to 10.3% in 2027. This gradual expansion is driven by the higher-margin PV overseas sales and the stable high margins of the magnetic business.

2. Balance Sheet Strength

• Assets: Total assets are growing steadily, driven by investments in fixed assets (overseas factories) and working capital (inventory/receivables for higher sales).
• Liabilities: The Company manages its liabilities well. Short-term borrowings are projected to decrease significantly in 2025E (from CNY 886m in 2024 to CNY 285m in 2025E), indicating a shift towards using internal cash flows rather than debt to fund operations. This deleveraging improves financial flexibility.
• Equity: Retained earnings are growing consistently, reflecting profitable operations. The minority interest increase reflects the structure of some overseas joint ventures or subsidiaries, which is normal for global expansion.

3. Cash Flow Dynamics

• Operating Cash Flow (OCF): OCF is strong but can be volatile due to working capital changes (inventory build-up for peak seasons, receivable cycles). The forecast for 2025E shows a dip in OCF per share (CNY 0.86) likely due to increased working capital needs for the revenue surge, but it recovers strongly in 2026-2027 (CNY 2.20+). This is a typical pattern for high-growth manufacturing firms.
• Investing Cash Flow: Consistent negative investing cash flow reflects ongoing CAPEX for capacity expansion. This is a positive sign of management’s confidence in future demand.
• Financing Cash Flow: The Company is reducing reliance on external financing, with net financing cash flow turning less negative or stabilizing, indicating a move towards self-funding growth.

4. Ratio Analysis

• ROE (Return on Equity): ROE is projected to remain robust at ~17-17.7% from 2025-2027. This is well above the cost of capital, indicating value creation. The slight dip in 2025E (17.01%) from 2024 (18.12%) is due to the equity base expanding faster than profits in the short term, but it stabilizes thereafter.
• Asset Turnover: Efficient use of assets is evident, with revenue growing in line with asset base expansion.
• Solvency: The net debt-to-equity ratio is negative (net cash position), indicating very low financial risk. The EBIT interest coverage ratio is healthy, ensuring no distress in debt servicing.

Market Sentiment and Analyst Consensus

According to market data, analyst sentiment towards DMEGC is overwhelmingly positive.

• Consensus Rating: Over the past 6 months, 20 analysts have issued "Buy" ratings, with no "Hold" or "Sell" recommendations recorded in the tracked period. The average score is 1.00, indicating a unanimous "Buy" consensus.
• Recent Activity: In the last month, 1 new "Buy" rating was added. In the last 3 months, 5 "Buy" ratings were issued. This consistent reinforcement of the Buy rating suggests that institutional analysts are confident in the Company’s trajectory and see little downside risk at current levels.

This strong consensus supports our view that DMEGC is a high-conviction idea within the sector. The lack of neutral or negative ratings indicates that the market perceives the risks as manageable and the upside as significant.

Final Thoughts

Hengdian Group DMEGC Magnetics Co., Ltd. is a prime example of a Chinese manufacturing champion successfully transitioning into a global enterprise. Its strategy of "Differentiation + Globalization" has insulated it from the worst effects of domestic overcapacity and trade protectionism.

For investors, the key takeaway is that DMEGC is no longer just a cyclical play on solar panel prices. It is a structural growth story driven by:
1. Global Supply Chain Reconfiguration: Benefiting from the need for non-domestic Chinese supply.
2. Technological Upgrading: Leading in high-efficiency PV and advanced magnetics.
3. Market Diversification: Serving multiple high-growth end markets (Utility Solar, NEV, AI, Consumer Tools).

We recommend investors accumulate shares of DMEGC, viewing any market-wide corrections in the renewable sector as buying opportunities. The Company’s fundamental strength, validated by its 1H 2025 results, provides a solid foundation for long-term capital appreciation.

Disclaimer:
This report is based on information available as of August 21, 2025, including the Company’s 1H 2025 interim report and public data. The analysis and opinions expressed herein are those of the authors and do not necessarily reflect the views of Guojin Securities. This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. Past performance is not indicative of future results. Risks include but are not limited to those outlined in the "Risks / Headwinds" section.

Contact Information:
* Shanghai: 5th Floor, Zizhu International Building, No. 1088 Fangdian Road, Pudong New Area, Shanghai. Tel: 021-80234211
* Beijing: South Side, 8th Floor, News Building, No. 26 Jianguomennei Street, Dongcheng District, Beijing. Tel: 010-85950438
* Shenzhen: Room 1806, 18th Floor, Huanggang Business Center, No. 2028 Jintian Road, Futian District, Shenzhen. Tel: 0755-86695353

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