Tsugami China (01651) enhances quality and efficiency through lean management, interim results hit a new high, with structural highlights making outstanding contributions to incremental growth.

Core financial data across the board hit new all-time highs, the strongest value signal released in TSUGAMI CHINA's (01651) latest disclosed interim report for fiscal 2027. According to Tsugami China's financial report, in the first half of fiscal 2027 the company achieved revenue of RMB3.02 billion, up 20.9% year-on-year; gross profit rose 26.6% year-on-year to RMB1.09 billion, corresponding to a gross margin of 36.2%, up 1.6 percentage points year-on-year; net profit increased 32.2% year-on-year to RMB660 million, corresponding to a net margin of 22.0%, up 1.9 percentage points year-on-year. Both business scale and all profitability metrics were the best in history. GMTEight noted that alongside Tsugami China's strong earnings delivery, the company also made positive progress at the capital market level. On September 7, Tsugami China was officially included in the Hang Seng Composite Index and entered the scope of Stock Connect eligible securities. For Tsugami China, a hidden manufacturing champion combining growth elasticity and growth sustainability, this financial report once again confirms the high visibility and high elasticity of its growth; while inclusion in Stock Connect means an effective expansion of its investor base, and the company's value discovery will be more efficient and thorough. In terms of shareholder returns, Tsugami China continued its tradition of actively rewarding shareholders. According to the interim report, Tsugami China plans to pay an interim dividend of HK$0.90 per share, versus HK$0.6 per share in the same period last year, showing that as profit continues to hit new highs, Tsugami China is simultaneously increasing its dividend payout. Moreover, Tsugami China also enhances shareholder equity through active share buybacks and cancellation. According to statistics, since the company's listing, it has cumulatively repurchased and cancelled 12.756 million shares, using a combination of "dividends + buybacks" to solidify shareholder returns and enhance shareholders' sense of gain. Profitability climbs another step, with structural highlights driving high-quality growth Since the beginning of this year, although the global macroeconomic situation has continued to present a complex landscape, domestic manufacturing has still achieved steady progress under the combined effect of industrial transformation and upgrading and the continued implementation of large-scale equipment renewal policies. Taking the machine tool industry as an example, on the one hand, with the repair of corporate profitability and inventory cycles, traditional demand such as general equipment has remained stable; on the other hand, the construction of AI computing power infrastructure has driven growth in demand for liquid cooling systems and high-speed optical communications, and emerging applications represented by AI liquid cooling are accelerating to "take over the baton" and become emerging increments with extremely high certainty. Tsugami China's comprehensive upward breakthrough in core financial data is directly related to its precise grasp of structural opportunities in the industry. During the reporting period, Tsugami China's precision lathes and precision machining centers contributed revenue increases of 24.5% and 9.3% respectively to RMB2.55 billion and RMB230 million, corresponding to revenue shares of 84.5% and 7.5%; other businesses including precision thread rolling machines, parts sales and after-sales services also continued their growth trend, with revenue up 8.4% year-on-year to RMB120 million. At the same time, because since the second half of the previous fiscal year, the automotive industry, which accounts for more than half of precision grinder orders, entered an adjustment cycle, and the decline in demand caused fluctuations in both order volume and shipments, revenue from precision grinders during the period was RMB120 million, accounting for 3.9%. Throughout the first half of the fiscal year, Tsugami Machine Tool's domestic and overseas sales showed a full-scale blooming trend, with domestic sales reaching RMB2.77 billion, up 18.2% year-on-year and 12.1% quarter-on-quarter, with the domestic revenue scale continuing to hit a record high. At the same time, thanks to the continued recovery of overseas demand, the company's overseas revenue during the period rose to RMB250 million, surging 62.3% year-on-year and 15.3% quarter-on-quarter. If we break down the industry distribution of downstream customers, we can more clearly perceive how Tsugami China captured structural opportunities and converted them into its own growth momentum. Data shows that during the period, the company's revenue from emerging industries reached RMB600 million, not only achieving a leapfrog growth of 212% year-on-year, but also surging 55% quarter-on-quarter against a high base. At this stage, Tsugami China has formed a first-mover advantage in emerging scenarios such as AI liquid cooling by virtue of process barriers and delivery experience. Going forward, as sub-sectors such as AI liquid cooling, optical modules, and humanoid Siasun Robot&Automation achieve large-scale development, the revenue contribution of emerging industries to the company is expected to climb further and become an important engine driving performance growth. The 3C industry also saw a significant jump in prosperity. In the first half of the fiscal year, benefiting from leading consumer electronics manufacturers restarting a strong new product cycle, the pace of equipment tendering clearly accelerated. Within this context, Tsugami China's revenue from the 3C industry during the period reached RMB460 million, surging 143% year-on-year, with a quarter-on-quarter increase of 34%. During the reporting period, although the automotive industry came under overall pressure due to the capital expenditure cycle, Tsugami China still achieved quarter-on-quarter growth of approximately 13%. Going forward, as the development logic of the auto parts sector switches from total volume expansion to structural upgrading, precision machining demand around scenarios such as electric drive and integrated die-casting post-processing of chassis will take over from traditional production line demand, and Tsugami China is expected to further consolidate its competitive advantage through its technical reserves and customer base. During the same period, Tsugami China's revenue from the pneumatic and hydraulic industries grew approximately 12% year-on-year and was basically flat quarter-on-quarter, continuing an overall steady development trend. On the basis of orderly business scale expansion, Tsugami China's profit potential has been fully released, with the company's profit elasticity significantly better than its revenue elasticity. In the first half of the fiscal year, the company's gross margin rose to 36.2% and net margin reached 22%, with profitability further strengthened on the high base of fiscal 2026. Behind this, on the one hand, the continued expansion of revenue scale effectively diluted fixed costs such as depreciation, management and R&D, laying the foundation for high profitability; on the other hand, under the guarantee of lean management and operating systems, Tsugami China is effectively converting the cost advantages brought by scale expansion into profit. Lean management improves quality and efficiency, capacity expansion opens up growth space As for the current state of macroeconomic operations, it must be said that uncertainties such as external tariffs and geopolitical disruptions will continue to recur, but under the historic opportunity of China's manufacturing transformation and upgrading, rigid demand for equipment renewal and upgrading will still grow over the long term, and the fundamental base for the development of precision machining equipment is very solid. Against this backdrop, Tsugami China, as a leader in precision machine tools, will continue to benefit deeply. The high visibility of Tsugami China's growth is underpinned by its lean management system, which runs through the company's entire R&D and manufacturing process. It is understood that Tsugami China takes "high precision, high speed, high rigidity" as its core quality objectives, integrates lean thinking into daily operations, and continuously eliminates waste and improves efficiency through a mechanism of improvement proposals involving all employeesemployees can directly submit improvement proposals and participate in company operations, and this high-participation mechanism maximizes the results of cost reduction and efficiency improvement. At present, Tsugami Machine Tool's product advantages are being converted into tangible order increments in the process of developing new industries. Currently, the company's AI liquid cooling and optical module products have entered the batch procurement stage, with strong downstream demand, becoming the main DRIVE of performance growth; at the same time, along with the growth in shipments of humanoid Siasun Robot&Automation, demand for high-precision machine tools for precision structural part processing is also rapidly scaling up. In fiscal 2027, Tsugami China took the lead in launching the BW389ZJ precision automatic lathe to overseas markets, a product mainly used in industries such as hydraulics and automobiles. In order to better undertake the rapidly growing incremental demand from downstream industries, Tsugami China is also stepping up construction of the Pinghu new plant. According to the company, the foundation backfilling of the new plant buildings at Pinghu has been completed, and scaffolding erection and column structure construction are underway. Production is expected to begin in early 2028, by which time the new equipment assembly capacity will reach approximately 3,000 units per year. At the same time, in order to expand processing categories and ensure delivery capability, Tsugami China is also actively introducing machining equipment to increase parts processing capacity. From an investment perspective, the outstanding latest financial report can be said to once again provide the most powerful proof of the quality of Tsugami China's fundamentals; and the change in investor structure brought about by inclusion in Stock Connect is expected to open a more efficient channel for its long-term value discovery. Heeding the signal, when the high visibility of fundamentals and the expansion of the investor base resonate, Tsugami China, as a hidden manufacturing champion combining high growth with a stable shareholder return mechanism, is expected to gain fuller market recognition and pricing for its long-term allocation value.