Wencan Holdings: Due to factors such as a significant increase in European energy prices, net profit for H1 is expected to decrease by 81.67%—85.33% YoY.

The share price of Wencan Co., Ltd. fell on July 15. By the close of trading on the 15th, Wencan Co., Ltd. had dropped by 1.28%, closing at 20.83 yuan per share.

The semi-annual earnings forecast disclosed by Wencan Co., Ltd. on the evening of July 14 showed: Based on preliminary calculations by the company's finance department, it is expected that the net profit attributable to owners of the parent company for the first half of 2025 will range from 12 million to 15 million yuan, representing a decrease of 66.8205 million to 69.8205 million yuan compared to the same period last year, a YoY decrease of 81.67% to 85.33%. It is expected that the net profit attributable to owners of the parent company, excluding non-recurring gains and losses, for the first half of 2025 will range from 9 million to 13 million yuan, representing a decrease of 60.7291 million to 64.7291 million yuan compared to the same period last year, a YoY decrease of 82.37% to 87.79%.

Regarding the main reasons for the change in H1 performance, Wencan Co., Ltd. announced in its announcement: In the first half of 2025, the global economic situation was unstable, with ongoing trade policy conflicts, rising energy and material prices, and a weak European economy, which had a phased impact on the European and American automotive markets and supply chains. The company expects to achieve operating revenue of approximately 2.79 billion yuan in the first half of 2025, a YoY decrease of approximately 9.28%, mainly due to the impact of changes in the European and North American automotive markets, resulting in a decrease in orders from some customers of the subsidiary, Le Bélier Group. The main reason for the change in profit this period is due to a decrease in operating revenue of Le Bélier Group, as well as the impact of the suspension of pipeline operations in Ukraine, which led to a significant YoY increase in European energy prices and overall manufacturing costs, resulting in a substantial increase in energy and other costs for Le Bélier Group. This led to losses for the subsidiary, Le Bélier Group, in the first half of the year, which in turn affected the overall YoY decrease in the company's net profit for the first half of the year.Despite the numerous challenges facing the industry, with the gradual adjustment of overseas low-pressure casting, high-pressure casting process layouts, and supply chains, coupled with the company's continuous deepening of its main business, strict cost control, and continuous improvement in management levels and team enforcement, in the long run, with its comprehensive and leading multiple molding process technologies and multi-point layout, the company is expected to benefit from the trend of regionalization in the automotive supply chain, maintaining its resilience for long-term development.

In response to the question "Are there any improvements in the order volume of overseas factories in Q2? Have energy costs at overseas factories been controlled?" previously raised on the investor interaction platform on June 27, Wencan Co., Ltd. responded: The order volume of overseas factories is affected by a combination of factors, including short-term adjustments in the supply chain due to complex factors such as local market demand and tariff policies. For specific operational situations, please refer to the company's subsequent disclosure announcements. In terms of energy cost control, overseas plants have implemented a series of measures to offset the impact of energy costs on the company.

When asked "Which customers does the Liuan plant primarily serve? What is its designed capacity, and what capacity utilization rate is expected this year? How will it affect H2 performance?" Wencan Group responded on the investor interaction platform on June 27: The Anhui plant has commenced production, mainly serving customers in Hefei and surrounding areas. Subsequent capacity increases will be implemented in batches based on customer orders to support overall business development.

Regarding "What is the current progress of the Chongqing plant? Expected to be put into use in H2, how will it impact H2 performance? Is it also a smart plant like the Liuan facility?" Wencan Group stated on June 27: The Shapingba plant in Chongqing is progressing as planned and is expected to be operational in H2 to meet diverse product demands. Upon completion, it will enhance the company's sales scale. Like the Anhui plant, the Chongqing facility aims to become an industry-leading smart plant, improving production efficiency, ensuring product quality, and reducing costs.

Wencan Group announced on May 9 that its subsidiary Guangdong Wencan Die Casting Technology recently received a nomination letter from a new domestic client, confirming its supplier role for three-in-one motor housings. Mass production is expected to commence in H2 2025, with a projected life cycle of five years and total sales of 200 million to 250 million yuan.

Wencan Group's 2024 annual report showed: To address accelerated electrification, integrated die casting adoption, and localized supply chains in Europe/America, the company continued investing in and optimizing global capacity, achieving sustained revenue growth (exceeding 6 billion yuan for the first time) and net profit of 115 million yuan (up 128.16% YoY). Excluding subsidiary Bailian Group, net profit reached 127 million yuan (up 166.79% YoY). The growth was attributed to expanded sales, optimized product mix (particularly rising delivery volumes of new car models), and increased revenue shares of auto body structures and integrated large castings, effectively countering supply chain cost reduction pressures and currency fluctuations.

Wencan Group noted in its annual report: 2025 remains fraught with external uncertainties amid insufficient global economic momentum. The company will leverage its domestic capacity layout, the launch of new car models by NEV customers, and opportunities in overseas markets to deepen localized customer integration and the construction of supporting service capabilities. It will strengthen synergies with the French Bertrandt Group to jointly expand business growth. The company will accelerate the deployment and iteration of information systems to enhance the refined management level across the entire supply, production, sales, and service chain, while simultaneously improving capacity utilization rates and ensuring delivery quality to continuously enhance its competitive edge.

Regarding its operational plan for 2025, Wencan Co., Ltd. stated in its 2024 annual report: In 2025, as industrial competition intensifies further, customer product price competition and annual price reduction pressures will increase. Meanwhile, the company's new production sites will gradually commence operations, bringing about the dual contradiction of capacity release ramp-up and product price reductions, posing greater challenges to the company's development and management. The company will strictly implement its development strategy, adhere to high-quality development, and improve its capacity utilization rates. It will offset the impact of product price competition and annual price reductions on the company's profitability through management efficiency and product scale improvements, creating greater value for industry development and company shareholders with craftsmanship and innovation, and establishing a new strategic height for the company in the die-casting industry. At the same time, the company will actively promote the optimization of global operational management processes through digital transformation to integrate global operational capabilities, match the company's globalization layout process, and enhance management efficiency and competitive edge. To achieve the aforementioned operational goals, the company will continuously optimize operational control and improve asset operational efficiency. Specific strategies and actions include:

1. Actively seize industry opportunities, continuously release capacity, and improve capacity utilization rates. In 2025, the car models of multiple customers of the company will enter the mass production and delivery phase, significantly improving the capacity utilization rates of various factories, especially for orders of ultra-large integrated structural parts. The company's large-tonnage die-casting machines will enter the full-capacity production stage. 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 capacities of die-casting and machine processing, and further improve production efficiency through technological advancements, ensuring product quality and quickly responding to various market and customer demands and changes to enhance 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 cycle. Through a series of cost control measures such as technology and process improvements, standardized operations promotion, production automation, quality level enhancement, supplier resource optimization, energy conservation and consumption reduction, and improvement of auxiliary material lifespan, the company will improve its profitability.

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

3. Plan the R&D and trial production of magnesium alloy products, and further explore 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 to aluminum alloy. It boasts good energy absorption and shock absorption performance, excellent weight reduction, seismic resistance, and noise reduction capabilities, as well as 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, susceptibility to oxidation, poor corrosion resistance, and poor room-temperature plastic deformation. Currently, the main technical 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 experience in aluminum alloy casting, the company has already carried out the R&D and trial production of multiple magnesium alloy products, achieving successful trial production with excellent performance. Currently, the company has 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 demand.

4. Initiate a new model of customer cooperation and steadily advance the construction of new factories In 2025, the company's newly laid-out Anhui factory has completed the construction of its plant, with the first batch of production lines installed and commissioned, 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 built by leasing a 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 component products. Currently, a total of five 7000T-9800T die-casting machines have been deployed. This represents a new type of cooperation model between the company and Seres Auto - the "factory-within-a-factory model." Supported by sufficient customer orders, this model will further reduce production costs, enhance production efficiency, establish deep binding, and create a new model of win-win cooperation, thereby further enhancing the company's comprehensive competitiveness.

5. Further strengthen the synergy and management of the Bertrandt Group, and actively accelerate the complementary global business layout. 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 mutual job rotations and synergy between 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 systematically carry out overseas investment and construction of high-pressure casting process production lines, providing flexible and differentiated manufacturing service solutions for global customers. Currently, large-scale integrated high-pressure casting structural parts are already in the process of in-depth communication with European customers.

6. Strengthen process transformation and enhance 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; comprehensively implement an integrated financial and business 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, rapidly respond to market demands, create standardized and visualized operational mechanisms, continuously improve organizational efficiency, and inject long-term momentum for sustainable development.

7. Optimize incentive and training mechanisms. Centered on strategic development goals, the company will comprehensively establish a more competitive compensation and incentive system, design different incentive plans for employees at different levels, deeply bind them, improve employees' quality of life, implement a skill upgrade plan for all employees, improve the internal talent training mechanism, and cultivate and recruit global talents.

Minsheng Securities issued a research report on April 29, recommending Wencan shares. The reasons for the recommendation mainly include: 1) Profitability improvement in Q4 2024, with Bertrandt's performance under pressure in Q1 2025; 2) Continuing to lead the industry in integrated die casting, achieving magnesium alloy die casting from 0 to 1; 3) Significant increase in core customer volume, expected to drive performance improvement. Minsheng Securities stated: The company is a pioneer in integrated die casting, actively embracing leading NEV manufacturers, with continuous breakthroughs in orders on hand. Starting from 2025, the company's core customer projects will gradually enter mass production, expected to drive gradual improvement in the company's performance. Risk warnings: Rising raw material prices; intensified competition in the integrated die casting industry; exchange rate fluctuations, etc.