Wencan Holdings: The Chongqing Shapingba factory is progressing in an orderly manner as planned and is expected to be put into operation in H2 this year. The Anhui factory has already commenced production.

The share price of Wencan Holdings rose on June 30. By 9:41 a.m. on the 30th, Wencan Holdings had risen by 0.34%, trading at 20.84 yuan per share.

When asked, "With the completion of capacity ramp-up at various factories, will your company's gross profit margin be effectively improved? What impact will the 60-day payment terms promised by various automotive OEMs have on your company?", Wencan Holdings responded on the investor interaction platform on June 27: If the new factory's orders meet customer planning expectations, it will help reduce unit costs and thus have a positive impact on gross profit margin improvement. However, due to the complex and ever-changing market environment, factors such as raw material prices and market competition may all affect the gross profit margin. Therefore, it is impossible to accurately predict the specific magnitude and timing of the gross profit margin improvement. If customers shorten the payment terms, it will, to a certain extent, be beneficial to the company's capital turnover efficiency.

When asked, "Has there been any improvement in the order volume of overseas factories in Q2? Has the energy cost of overseas factories been controlled?", Wencan Holdings responded on the investor interaction platform on June 27: The order volume of overseas factories is affected by a combination of factors, including short-term adjustments in the supply chain caused by complex factors such as local market demand and tariff policies. For specific operational situations, please pay attention to the company's subsequent disclosure announcements. In terms of energy cost control, overseas factories have taken a series of measures to offset the impact of energy costs on the company.

When asked, "Which customers does the Lu'an factory mainly serve? What is the designed capacity of the factory, and what is the expected capacity utilization rate for this year? What impact will it have on the performance in the second half of the year?", Wencan Holdings responded on the investor interaction platform on June 27:The Anhui factory has commenced production, mainly serving customers in Hefei and surrounding areas. Subsequently, capacity will be increased in batches according to customer orders to support the overall business development of the company.

Wencan Holdings also responded on the investor interaction platform on June 27: The new energy automotive industry in Anhui has multiple advantages. It is an important automotive production province in China. The company's Anhui factory mainly serves the production needs of various car models for local surrounding customers. The Anhui factory releases capacity in batches according to orders on hand and, at the same time, focuses on technological innovation and efficiency improvement during the production process to continuously enhance production efficiency and product quality, laying a solid foundation for the company's sustainable development.

When asked, "What is the current progress of the Chongqing factory? It is expected to be put into use in the second half of this year. What impact will it have on the performance in the second half of the year? Is this factory also a smart factory like the Lu'an factory?", Wencan Holdings stated on the investor interaction platform on June 27: The Chongqing Shapingba factory is progressing in an orderly manner according to the plan and is expected to be put into use in the second half of this year to meet customers' demands for different types of products. After the factory comes into operation, it will help expand the company's sales scale. Like the Anhui factory, the Chongqing Shapingba factory is committed to becoming an industry-leading smart factory, aiming to improve production efficiency, ensure product quality, and reduce production costs.

According to Wencan Holding's 2024 annual report, in 2024, in response to the accelerated electrification, the popularization of integrated die-casting, and the localization trend of European and American supply chains, the company continued to invest in and optimize its domestic and overseas capacities, achieving a continuous increase in operating revenue, which exceeded 6 billion yuan for the first time; it achieved a net profit of 115 million yuan, up 128.16% YoY; excluding the data of its subsidiary, Bertrandt Group, the company achieved a net profit of 127 million yuan, up 166.79% YoY. Regarding the reasons for the net profit growth, Wencan Holding stated that the main reasons were the expansion of the sales scale and the optimization of the product mix, especially the increase in the delivery volume of new car models from customers, which drove a significant increase in the revenue share of auto body structural parts and integrated large castings, effectively offsetting the external impacts of cost reduction pressure in the supply chain and exchange rate fluctuations.

In its annual report, Wencan Holding stated that in 2025, there will still be many external uncertainties, and the world economy will lack sufficient growth momentum. The company will rely on its domestic capacity layout, the launch of new car models from new energy vehicle customers, and opportunities in overseas markets to deepen the integration of localized customers and the construction of supporting service capabilities; strengthen the synergistic effect with the French Bertrandt Group to jointly expand business increments; accelerate the deployment and iteration of information systems to improve the refined management level of the entire supply, production, marketing, and service chain, synchronously improve capacity utilization rates, and ensure delivery quality, continuously enhancing competitive advantages.

Regarding its business plan for 2025, Wencan Holding introduced in its 2024 annual report that in 2025, as industrial competition further intensifies, customer product price competition and annual price reduction pressures will further increase. At the same time, the company's new production sites will be put into operation one after another, bringing about the dual contradiction of capacity release ramp-up and product price reduction, posing greater challenges to the company's development and management. The company will strictly implement its development strategy, adhere to high-quality development, improve its capacity utilization rates, and offset the impact of product price competition and annual price reductions on the company's profitability through improvements in management efficiency and product scale. It will create greater value for industry development and company shareholders with ingenuity and innovation, establishing a new strategic height for the company in the die-casting industry. Meanwhile, the company will actively promote the optimization of global operation management processes through digital transformation to integrate global operational capabilities, match the company's globalization layout process, and improve management efficiency and competitive advantages. To achieve the above business objectives, the company will continuously optimize operational control and improve asset operational efficiency. The specific strategies and actions include:

1. Actively seize industry opportunities, continuously release capacity, and improve capacity utilization rate. By 2025, the car models of multiple customers of the company will enter the mass production and delivery phase, significantly increasing the capacity utilization rate of various factories of the company. In particular, orders for ultra-large integrated structural parts will surge, and the company's large-tonnage die-casting machines will enter the stage of operating at full capacity. To meet customer order demands, the company currently has over 70 large die-casting machines ranging from 1100T to 4500T, 2 6000T die-casting machines, 3 7000T die-casting machines, and 6 die-casting machines of 9000T and above. The company will actively formulate production plans to match the production capacity of die-casting and machine processing, and further enhance production efficiency through technological advancements, ensuring product yield rates, and rapidly responding to various demands and changes in the market and from customers, thereby improving the company's performance. Meanwhile, the company will continue to implement multiple cost-improvement measures, integrating cost management from the beginning of R&D to the end of the project lifecycle. Through a series of cost-control measures such as technological and process improvements, standardized operations, production automation, quality enhancement, supplier resource optimization, energy conservation and consumption reduction, and improvement of auxiliary material lifespan, the company will enhance its profitability.

2. Strengthen the development of NEV customers and large integrated structural parts products. By 2025, the company will leverage its accumulated advantages in automotive lightweighting and large integrated structural parts products to strengthen the development of NEV customers and large integrated structural parts products, establishing strategic customer accumulation and product designation advantages. Guided by more technologically advanced products, the company will further enhance the R&D, expansion, and marketing of battery box and chassis structural parts products. Meanwhile, to meet the demands of the commercial vehicle lightweighting market, the company will further explore renowned commercial vehicle customers, providing them with higher-quality large lightweight automotive parts.

3. Layout the R&D and trial production of magnesium alloy products, further exploring new product series for automotive lightweighting. Magnesium alloy is lighter in weight, being two-thirds that of aluminum alloy, while having similar stiffness and strength, good energy absorption and shock absorption performance, excellent weight reduction, shock absorption, and noise reduction properties, and superior thermal conductivity. Additionally, magnesium alloy reserves are abundant, offering the potential for further automotive lightweighting. However, due to magnesium alloy's high chemical reactivity, there are currently some bottlenecks to be addressed for large-scale product applications, including flammability, oxidization, poor corrosion resistance, and poor plastic deformation at room temperature. Currently, the main technological routes for magnesium alloy forming include ordinary cold chamber magnesium alloy die-casting, semi-solid die-casting, and semi-solid thixoforming. As of the date of this report, based on its accumulated experience in aluminum alloy casting, the company has already carried out R&D and trial production work for multiple magnesium alloy products, achieving successful trial production with excellent performance. Currently, the company has already obtained customer designation for its first magnesium alloy product. Subsequently, the company will further explore new product series for automotive lightweighting based on the R&D of magnesium alloy products and customer demands.

4. Launching a New Model of Customer Collaboration and Steadily Advancing the Construction of New Factories In 2025, the company's newly planned Anhui factory has completed the construction of its plant, with the first batch of production lines installed, commissioned, and entering the product sampling stage. The Chongqing factory and the second Foshan factory have both entered the rapid construction phase and will be put into use as soon as possible. Meanwhile, the high-pressure casting workshop that the company has invested in and constructed by leasing the plant within the SERES Auto Super Factory has entered the operational production phase in Q4 2023. This workshop primarily serves SERES Auto and is positioned to produce ultra-large integrated structural parts. Currently, it has deployed a total of five 7000T-9800T die-casting machines, representing a new type of collaborative model between the company and SERES Auto—the "factory-within-factory model." Supported by sufficient customer orders, this model will further reduce production costs, enhance production efficiency, establish a deep bond, and create a new model of win-win collaboration, thereby further enhancing the company's comprehensive competitiveness.

5. Further Strengthening the Synergy and Management of the Bertrandt Group and Actively Accelerating the Complementary Layout of Global Business The Bertrandt Group has 10 factories worldwide, including 2 in Mexico, 3 in Hungary, 1 in Serbia, 1 in France, and 3 in China. In 2025, the company will further improve the organizational structure and personnel adjustments of the Bertrandt Group, enhance its operational and management efficiency, strengthen the mutual rotation and synergy of personnel from both sides, achieve deep integration, and learn from each other's strengths. The company will further analyze and integrate customers and products with the Bertrandt Group, resolve production issues in Mexico and Serbia, and leverage its geographical advantages to orderly carry out the investment and construction of high-pressure casting process production lines abroad, providing flexible and differentiated manufacturing service solutions for global customers. Currently, large integrated structural parts for high-pressure casting are already in the process of in-depth communication with European customers.

6. Strengthening Process Transformation and Enhancing Digital Management Capabilities The company will continuously iterate its process architecture and best practices to ensure efficient, orderly, and low-risk operation of various business activities. It will comprehensively implement an integrated financial and operational management model, plan to introduce a new-generation ERP system, connect core execution systems such as procurement, production, and warehousing, and accelerate the digital upgrade of management. Through IT process optimization, it will rapidly respond to market demands, create standardized and visualized operational mechanisms, continuously enhance organizational efficiency, and inject long-term momentum into sustainable development.

7. Optimizing Incentive and Cultivation Mechanisms Centered around strategic development goals, the company will comprehensively establish a more competitive compensation and incentive system, design different incentive schemes for employees at different levels, establish a deep bond, improve employees' quality of life, implement a skill upgrade plan for all employees, improve the internal talent cultivation mechanism, and cultivate and recruit global talents.

Additionally, Wencan Co., Ltd. previously released its Q1 2025 financial report, which showed that in the first quarter, the company's total operating revenue was 1.27 billion yuan, a decrease of 210 million yuan compared to the same period last year, representing a YoY decline of 14.17%. The net profit attributable to shareholders was 3.8603 million yuan, a decrease of 58.2022 million yuan compared to the same period last year, representing a YoY decline of 93.78%. Regarding the reasons for the decline in net profit, Wencan Co., Ltd. stated that the net profit of domestic factories was basically flat YoY, mainly due to the decrease in revenue of the Bertrand Group and the significant increase in energy costs of the Bertrand Group caused by the substantial rise in energy prices in Europe, resulting in losses for the Bertrand Group, a subsidiary of the company, in the first quarter, which in turn affected the overall YoY decline in the company's net profit for the first quarter.

Minsheng Securities issued a research report on April 29, recommending a rating for Wencan Co., Ltd. The main reasons for the rating include: 1) Improved profitability in Q4 2024, with pressure on the Bertrand Group's performance in Q1 2025; 2) Continuing to lead the industry in integrated die-casting, achieving magnesium alloy die-casting from scratch; 3) Significant increase in volume from core customers, expected to drive performance improvement. Risk warnings: Rising material prices; intensified competition in the integrated die-casting industry; exchange rate fluctuations, etc.