Good day, and thank you for standing by. Welcome to the China Yuchai International Limited First Half 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Kevin Theiss. Please go ahead.

Thank you for joining us today, and welcome to China Yuchai International Limited's Conference Call and Webcast for the first half of 2025 ended on June 30, 2025. Joining us today are Mr. Weng Ming Hoh and Mr. Choon Sen Loo, President and Chief Financial Officer of CYI, respectively. In addition, we also have in attendance Mr. Kelvin Lai, General Manager of Operations of CYI and Chairman of MTU Yuchai Power Company Limited or MTU Yuchai Power. Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, optimistic, confident that, continue to, predict, intend, aim, will or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that may be deemed forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the company's operations and financial performance and condition and are based on current expectations, beliefs and assumptions, which are subject to change at any time. The company cautions that these statements, by their nature, involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors such as government and stock exchange regulations, competition, political, economic and social conditions around the world and in China, including those discussed in the company's Form 20-F under the headings Risk Factors, Results of Operations and Business Overview and other reports filed with the Securities and Exchange Commission from time-to-time. All forward-looking statements are applicable only as of the date they are made, and the company specifically disclaims any obligation to maintain or update the forward-looking information, whether of the nature contained in the press release made during today's call or otherwise in the future. Mr. Hoh will provide a brief overview and summary, and then Mr. Loo will review the financial results for the first half year ended June 30, 2025. Thereafter, there will be a question-and-answer session. For the purposes of today's call, the 2025 and 2024 financial numbers are unaudited and presented in RMB and U.S. dollars. All financial information presented is reported using the IFRS accounting standards as issued by the International Accounting Standards Board. Mr. Hoh, please begin your prepared remarks.

Thank you, Kevin. We are pleased to report that our unit sales in the first half of 2025 outperformed nearly every on-road market category. Revenue increased by 34% year-over-year to RMB 13.8 billion or USD 1.9 billion. Gross profit rose by 30.3% year-over-year to RMB 1.8 billion or USD 257 million. Operating profit increased by 42.3% year-over-year and profit to equity holders of company rose by 62.2% year-over-year. Earnings per share were 65.8% higher year-over-year to RMB 9.75 or USD 1.36. This growth in our financial result was due to the sale of our light-duty, medium-duty and heavy-duty engines, our new energy products, high horsepower engines and solutions we provide to our customers. Our sales exceeded the vehicle unit sales in our market categories and demonstrated significant year-over-year sales growth in the first half of 2025. According to data from the China Association of Automobile Manufacturers, CAAM, truck and bus unit market sales, excluding gasoline and electric powered vehicles in first half 2025 declined by 2.6% year-on-year, while our combined truck and bus unit sales were up by 38% year-on-year. Our overall truck engine sales increased by 44.3% year-over-year compared to CAAM truck market unit sales declining by 1.8%. Our truck engine unit sales growth was led by a 40.7% year-over-year rise in the important heavy-duty truck segment in contrast to the negative 2.8% year-over-year growth in the heavy-duty truck market unit sales according to CAAM. We experienced strong growth in the HD market truck engine segment or heavy-duty truck engine segment, which is mainly attributable to gas engine sales for heavy-duty trailers. Our overall bus engine unit sales in first half 2025 achieved 8.9% year-over- year growth compared with CAAM bus unit sales of negative 7.5% year-over-year. Our heavy-duty bus engine unit sales increased by 14.4% year-over-year, contrasted with…

Thank you, Weng Ming. Now let me review our unaudited 6 months results ended June 30, 2025. Revenue was RMB 13.8 billion or USD 1.9 billion compared with RMB 10.3 billion in first half 2024. The total number of engines sold in first half 2025 increased by 29.9% to 250,396 units compared with 192,743 units in first half 2024. The increase was mainly due to higher sales in almost every engine segment. The company's truck and bus engine unit sales rose by 38% year-on-year in the first half 2025 despite a decline of 2.6% witnessed in the commercial vehicle market, excluding gasoline and electric powered vehicles as reported by the China Association of Automobile Manufacturers, CAAM. The company's truck engines were up 44.3% year-over-year compared with negative growth of 1.8% in truck market unit sales as reported by CAAM. In particular, heavy and light-duty truck engine unit sales were 40.7% and 82.1% higher year-over-year in contrast to CAAM market unit sales growth of negative 2.8% and 1.3%, respectively. The company's heavy-duty bus engine sales rose by 14.4% compared to a CAAM bus market unit sales reduction of 13.5%. Overall, bus engine unit sales increased by 8.9% in first half 2025 in contrast to a 7.5% decline in overall market unit sales as reported by CAAM. Engine sales to off-road markets increased by 17.5% year-over-year in first half 2025. Engine sales to the marine and power generation markets drove the off-road segment growth with a 31.5% year-on-year increase. Sales for industrial applications rose by 27.2% year-over-year in first half 2025, while engine sales for agricultural equipment experience modest growth in first half 2025. Gross profit increased by 30.3% to RMB 1.8 billion or USD 257 million from RMB 1.4 billion in first half 2024. The increase was mainly due to higher…

Please note, some officers of China Yuchai are remotely calling into the conference call. This may result in a slight delay in providing answers to some questions. We apologize for any inconvenience, and thank you for your patience. If you would like to ask questions in Chinese, please kindly translate your own questions into English before turning to management for answers. And before we start the Q&A, we would also like to announce that the management will be attending the forthcoming UBS Conference on September 1 and September 2, and Bank of America Merrill Lynch Conference on September 8 through September 10. If you are interested in a one-on-one or small group meeting, please contact the salespeople at these banks. Given the tight meeting schedule and travel plans, we will not be able to accept outside -- meeting requests outside of the conference venues. Now operator, we are ready for questions.[Operator Instructions] And now we're going to take our first question, and it comes from the line of Yiming Liu from Guotai Haitong Securities.

This is Yiming analyst from Guotai Haitong Securities. Congratulations to your very outstanding results for the first half. My question is on the capacity. So do you have any plan to raise your capacity for the JV with MTU or for the GYMCL entity?

This is Kelvin Lai. Regarding on the capacity and then actually, we have sufficient capacity on the MTU joint venture side. The only -- the bottleneck is the supply of the components which limited our production at the present. So if we can have the sufficient component supply from Germany, then we can increase our capacity there. But for the -- our main operation, the Yuchai operation at the GYMCL, currently, the capacity is about 2,000. And we have extension plan and that we will be ready by end of Q3 or later or early Q4 and then we will have some more extension with about 30% increase of the capacity by end of this year. And so next year, then we can enjoy a more productive roll off of the engine.

Okay. And the other question from me is on the guidance for the full year. So do you have any guidance on the unit sales for the whole year 2025? And specifically, do you have any guidance for the data center-related generators, how many units of that will be sold for the whole year 2025?

Sorry, Mr. Liu, we -- as a policy, we do not provide guidance.

Now we're going to take our next question. And the question comes from the line of Don Espey from Shah Capital.

We have a few questions actually. First question, does Yuchai have 10% or higher market share in long-bore engines for data centers? And also, do you foresee this market share holding more improving going forward?

Don, this is Kelvin again. Thank you for your question. We -- our market share on the long-bore engine or the -- well, it's made for the data center application and that our market share is well ahead of 10% of the global market. And we believe we can maintain a similar share then the -- at least this and next year, yes.

And when do you see Yuchai's net return surpassing 5% of sales from 2.6% in first half? And can you talk about initiatives to accomplish this objective?

Well, I mean, there's a lot of factors that will determine the return on sales, Don. Now there's too many to actually try to pin it down. So for now, we have not -- we are not really prepared to actually announce a target date for the return on sales. As I said earlier, we do not provide any guidance.

[Operator Instructions] And now we're going to take our next question. And the question comes from the line of Wei Shen from UBS.

The first question is about the ASP increase. You did mention that you may consider raise ASP for data center engines this year in the second half. So any color on this?

Okay. I think we have not really increased the average selling price for data centers much in this year. As I said, I think we really produce the engines, and we sell the engines to our OEM customer. The OEM customer in turn will determine the actual price of the final product, which is the genset that we sell to the end customer. Yes, our engine price has gone up slightly, but yes, it has gone up slightly.

Sorry, could you -- you mean for the first half or the second half?

For the first half. We do not provide guidance for -- again, we do not provide guidance.

Sure. My second question is, you did mention you would like to expand from engine making to generator making. So you will expand the business. Could you give us some color on this? How will this translate into revenue growth and profit per unit growth?

Now this -- we actually -- our core business is really just to sell engines. And we'll only do genset only if any customers wanted us to do it, right? So the reason for this is, we do not want to compete with our customers, the real customers, which is the OEMs. By building the both gensets, actually we're competing with customers. right? So unless the end user has a really specific need for it, otherwise we rather not do that and let our customer which is the OEM deal with it. So we do not have big revenue gain from this.

Forgot to mention, Shen Wei from UBS.

Now, we are going to take our next question, and the question comes from the line of [ Hing Shi ] from CICC.

I'm Hing Shi from CICC. My question -- there are 2 questions from me. The first question is about the on-highway engines. So we see from this year, it has a strong market share in both truck and bus engines. So I wonder the reason why the company has so strong market share in on-highway engines. And also, we see the rapid growth of new energy adoption in China's commercial vehicle sector. So I want to know how our company is seeing this phenomena and could this negatively impact the company's engine business? This is my first question. And my second question is that the company holds a significant amount of cash on hand. So can we expect any upcoming capital operation plans or higher shareholder return initiatives in the near future?

Okay. Let me answer the first question, and then I will leave the second question then to our CFO, to answer. So regarding on the truck -- on-highway market on the truck and bus sales. Our truck engine sales and is much better than the last year and then mainly because of we have some of the new customer from the Tier 1 and Tier 2 OEM and then they -- I mean, start using the Yuchai engine for the heavy-duty, medium-duty engine mainly. And on the second question -- on the second reason is also because of our introduction of the new gas engine and which is also highly adaptive for the trailer market in the Chinese domestic market. So they are one of the major reasons. Thirdly is because of the export. So the export is one of our major contribution to the growth in the first half of 2025. Regarding on the bus segment, very similar. Export market is one of the major growth -- major driver of the growth. And also, we had also quite successful on the heavy-duty bus segment and then for those buses and existing 11 meter or 12-meter above. So this is where is our major drive on the growth of the first half.

I will take the second question. Thank you for questions. So yes, our cash and bank balances increased quite handsomely compared to last year's June, end of last year. So the cash we will continue to deploy in our CapEx, including our operational maintenance CapEx. And also, you may notice that our R&D expenses also increased, so that we continue to use our cash wisely in this aspect. In terms of any specific plan in future that we will not make any comment at this point.

Now we're going to take our next question, and it comes from the line of Andy Li from Daiwa Capital Markets.

This is Andy Li from Daiwa. Congrats on the results. I just want to ask around the power gen topic. I just quickly want to clarify the 2,000 capacity from Yuchai brand, you mentioned just now, is it 30% up? I want to clarify that. And what's the execution right now? I understand you have some target or capacity share in the last -- asked at last call. Is there any update? And how is the execution there? And what about the latest negotiation activities with your clients right now from the data center point?

Andy, it's Kelvin. Thanks for the question. First of all, and then regarding on the Yuchai brand, I mean, our own in-house brand and our factory, currently, the production of 2,000 units is already the -- I mean, the highest we can do. So we confirm that there will be about 30% increase or more than 30% increase by end of this year. So at this stage and then the majority of our high horsepower engine is going to the data center. And in the first half of the 2025 that's about 650 engine for the data center and the rest is going for other applications as well. So this is our current plan. And then because the strong demand of the market on the data center projects, I think no matter how much energy increase it is difficult to meet up the current demand. And also, this is also a risky operation as well. So we are more conservative way then into the expansion plan of our factory. So we will see how the markets go on in the year 2026 and beyond before we have any planning for further extension.

Add to that, I mean the 2,000 capacity that we have for high horsepower is not entirely for data centers. So there are other applications as well that this is used for. But a large portion of it will come to data center, okay?

What about the latest auction or negotiation with your data center clients?

What do you mean?

Any like the pricing color? And I remember the last time you mentioned it's quite competitive as well, and they do the auction and the pricing are quite [indiscernible] as well. Yes. What was the dynamic there?

Okay. I think for buying -- for purchase of such magnitude, usually, they will ask for tenders. If not tenders, they will ask for several suppliers to supply, right? So a lot of this is done through our OEMs. So the OEMs -- we could probably participate in tenders through more than one OEM, because OEMs essentially is our customer and the OEMs will sell on to the end customer. But then in terms of competitiveness, yes, there is still a very competitive industry despite a shortage of capacity right now in the marketplace. So a lot of pricing for this final product of genset is determined by our customers.

Now we're going to take our next question and it comes from the line of [ Gustavo Frez ] from Global Securities.

I want to first say congratulations to the team. The results published this morning are amazing. You guys are doing a terrific job. I don't think I recall seeing these numbers, so strong numbers in the conference call for a long time. And I guess my question is, I thought or in my mind, I thought that what was going, what was transformed [Technical Difficulty]

Breaking up for us. We can't hear you.

Excuse me, Gustavo.

Yes.

We can't hear you.

Can you repeat your question again, please? Excuse me, Gustavo, your line is breaking up. We cannot hear you. Please can you repeat your question again?

Can you hear me now?

Yes, we can.

Okay. Sorry about that. I just -- I first want to congratulate the team for what's going on. The numbers published this morning are terrific. So congratulations to everyone. My question is the following. I thought that what was transforming China Yuchai was the power generation business unit. But when I look at the release this morning, it's amazing to read that most of the business units at 30% plus up this year, while the industry is flat. So there's something else going on. And I just want to understand if you guys find a specific reason for beating the market so badly this first half of the 2025.

Thanks, Mr. Frez. Basically, in the case of vehicle engines, we team up with the OEMs -- our customer OEMs who actually were actually winning some market share in the market. And also, they are willing to use more of our engines as opposed to our competitors' engines. So that one is one of the reasons that happened. And of course, it didn't happen just overnight. We have been cultivating the relationship for quite a number of years. So the other, what we call a significant driver that is the export. Our export has been growing very well and it's been increasing by double digits over the last several years and still continuing to improve. The good thing about export sales is that we do not need to sell them the National VI or Euro VI compliant engine at least, especially Euro V below simply because the areas, the countries that we export to are all the countries in the world, except North America and European markets, right? So that one -- that does give us a little bit better margin as well in the sense, okay? So the third one -- the third driver, of course, is this year is the data centers. There's been a huge growth in data centers. And those -- all those competitors who participated in this segment are also seeing very good demand. So we have quite a few things going forward, and they all came together this year.

Now we're going to take our next question, and the question comes from the line of [ Jiahao Wang ] from [ Johan Fa ] Securities.

Congratulations on your very outstanding performance. My question is, we have seen very booming demand for overseas data center markets. Does the company have any plans to expand overseas, including directly sales to overseas Internet giants?

Currently we are working with our OEM, they are our major customer. So they cover the domestic market and overseas market as well. So we will maintaining this practice and then they work through our OEM and then for both our domestic and overseas market. And there's also some change recently is from the Chinese, the Internet, the major player. And then so they are approaching us and then direct -- and then to placing the order. So we will -- also and then they are adapting and then their request and then work closely with them. But this is not all the -- I mean, the order come from -- but our major orders is still coming from OEM.

I answer your question. I think the bulk of our sales has gone to the domestic market. The domestic market is actually quite strong. So we have been servicing more on the domestic market and we have very little that has gone out to the export market, especially in Southeast Asia like Malaysia, Singapore. There are some, but not that that big part of business yet.

And now we'll go and take our next question, and the question comes from the line of [ Jackie Yu ] from CGS International.

So my question is about the capacity of the diesel engines. I want to first clarify on the number of 2,000 units capacity. Could you clarify if this is the overall capacity for the JV part plus the in-house part? And also, could you share for the in-house part, what is the bottleneck for the capacity, please?

Okay. So the 2,000 units that you mentioned, yes, it is for the overall high horsepower class 4 engines. But the part of it would be to cater to the data centers. Right now, the constraint that we have is not so much the assembly. It's in the -- we just resolved the casting capacity, which is in the machining capacity. So that's something that we're working on right now. Once we have resolved the machining capacity, then we should be able to increase volume -- for the volume. Now this is for the Yuchai side, whereas for the MTU side, it's basically the supply of components. The capacity is there, but the components which comes from overseas Western countries, there's limited capacity there themselves. And so they have to allocate the components, and we have been trying to get as much as we can and that's the bottleneck.

And my follow-up on the capacity of the JV part. So from what I understand, MTU is supplying the -- so this German component is being supplied to both the China factories and also in other countries. Could you share if this is a concern about the end market ASP? And how much is the difference between the ASP in China market versus overseas market?

I mean on the joint venture operation, because of the joint venture agreement and then there's some component that we need to procure from the German operation. So that's why we are not allowing them to localize those items. And at the moment, mainly those items being insufficient high that being a bottleneck for the whole operation. And those items, they are not only intent to supply to China, but they will also supply the worldwide operation of the MTU. So that's why our allocation for the Chinese operation is somehow very limited and that depends on the overall demand of the global market. And there will be some priority in it for the German operation and also for the U.S. operation as well. So that's why we are always -- I mean, there's some shortage. And then we have the order book -- already in the book.

Maybe, operator, we'll take a question from the webcast. The question is any chance you will raise the dividend payout and repurchase? We have no plans for the repurchase right now. But in terms of dividend, I mean, our track record and payment of dividend is quite good, although we do not have a formal dividend payout policy. So it will be likely continue the same practice going forward.

[Operator Instructions] Excuse me, Andy, would you like to ask a question? And now we have a question from Jackie Yu from CGS International. And I have a question from Andy Li from Daiwa Capital Markets.

Can I have a follow-up on the JV profit? I remember last result, you mentioned that there was another session in your JV that was just reached breakeven. How is that segment and other segments performing this first half?

Okay. I think that segment that was breakeven last year, it's actually making a little bit more profit this year, but it's still not very material yet. We still need some time to develop that. So the part of the profit from JV in the associates account comes from mainly from the MTU Yuchai joint venture.

We have now reached the end of our question-and-answer session. I will turn the call back over to Mr. Hoh. Please go ahead.

Thank you all for participating in our conference call. We wish each and every one of you good health, and we look forward to speaking with you again. Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. My apologies. We just have got one more question come through. Are you happy to take?

Yes, please.

Just give us a moment. And the question comes from the line of [ Martin Zhang from HT Capital. ]

I just want to clarify that for the data center engine shipment, like how many have you shipped from Yuchai and how many it was shipped from the MTU JV for the first half of the year?

Martin, at the first half of 2025 and our own operation, the Yuchai and then they shipped 650 units for the market. And the MTU joint venture is 350. So total is about 1,000 altogether for the first half.

Are they all for the data center or --

Yes. This is for data center.

And may I get a breakdown for like domestic and overseas? I think you mentioned that for Yuchai yourself mostly for domestic, but how about for the MTU JV?

For the JV and then there's a little more share for the export to our OEM, but still mainly and then for the domestic market.

And I got the last one that may I ask about your order visibility. I think with your expanded capacity, are you still fully booked this year? And like if you take a new order, when will be like -- I mean, the fastest time that you could deliver?

We actually had a full order book for this year and for our Yuchai brand and also for the joint venture brand. For the next year, on the 2026, the joint venture is starting receiving order.

And this was our last question for today. And we now would like to turn back to Mr. Hoh for any closing remarks.

Okay. I think we already did that earlier. So yes, thank you all. We will speak to you again soon, right? Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.