Overall, Lijin Technology (the “Company”)'s interim revenue and profit attributable to shareholders fell slightly short of our expectations. The company announced revenue for the first half of fiscal year 2025 of HK$2.59 billion, down 5.8% year on year, lower than our expectations, mainly due to the company's die-casting business revenue falling 18.7% year over year to HK$1.62 billion. Gross profit increased by 3.3% to HK$0.745 billion. This increase was due to a 2.5 percent year-over-year increase in gross margin to 28.7%. Shareholders' net profit was HK$148 billion, down 27.7% year over year. Shareholders' net profit margin fell 1.8 percentage points to 5.7%. This decline was mainly due to a drop in gross margin and an increase in R&D spending in the die-casting sector.

In the short term, we remain optimistic about the company's orders as demand is being suppressed due to international policy risks. Over the long term, we believe the company's revenue will remain stable.

We maintain a “buy” rating, but we may adjust our price targets and profit forecasts in the future to reflect changes in market conditions.

The company's die-casting business is expected to rebound in the second half of FY2025 as customer investment risks are reduced. In the first half of fiscal year 2025, the company's die-casting business revenue fell to HK$1.62 billion, a year-on-year decrease of 18.7%. Operating margin declined 1.7 percentage points year over year to 10.4%. According to our analysis, we believe that the main reason for this decline is international policy risk for the company's downstream customers (especially NEV manufacturers). Furthermore, recent developments in autonomous driving technology by the company's major customers Tesla, Huawei, and Xiaopeng may increase demand for their cars, thereby increasing demand for die-casting machines. Given that risk has now been reduced, and a favorable technical environment, we expect the rebound in demand for die-casting machines to continue into the second half of FY2025, and possibly into FY2026.

The company's injection molding machine business experienced strong growth in the first half of fiscal year 2025. In the first half of fiscal year 2025, the company's injection molding machine business revenue increased to HK$0.881 billion, an increase of 30.1% year over year. Operating margin increased 3.0 percentage points year over year to 5.8%. The rebound was mainly driven by policy. Government policies, including the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, have increased domestic demand for the company's injection molding machine equipment. The company divides injection molding machine business revenue according to downstream industries.

Among them, the largest industries were auto parts, consumer goods, and household appliances, which accounted for 30.6%, 15.5%, and 15.9% of total revenue, respectively, with year-on-year increases of 15%, 84%, and 54%, respectively.