Highlighting the growth potential and stable high dividend of TSUGAMI CHINA (01651), the interim report confirms the growth rationale.

The Chinese manufacturing industry, known for its scale and volume, is undergoing a magnificent transformation. In recent years, high-tech terminal markets represented by new energy vehicles and artificial intelligence have rapidly expanded, further accelerating the process of transformation and upgrading of China's manufacturing industry. This new change has significantly boosted the prosperity of the entire industry chain, with high-end CNC machine tools being a typical beneficiary. According to a research report by Emperor Securities, since Q1 2024, the Chinese machine tool industry has entered a clear upward cycle, characterized by a continuous strengthening of momentum in various manufacturing sectors. The financial report of a leading company in the machine tool industry that was just released further confirms this. On November 13, TSUGAMI CHINA (01651) announced its performance for the first half of the 2026 fiscal year (April-September 2025), showing that the company achieved a record revenue of RMB 2.497 billion during the reporting period, an increase of 26.2% year-on-year. Gross profit was RMB 863 million, an increase of 35.1% year-on-year, with a corresponding gross profit margin increase of 2.5 percentage points to 34.6%. Net profit reached RMB 502 million, marking a 47.7% year-on-year increase, with a net profit margin of 20.1%. Not only is the profit scale and profitability the highest in the company's history, but TSUGAMI CHINA's profitability in the industry is also leading, making it the "most profitable" machine tool company. Additionally, TSUGAMI CHINA announced a semi-annual dividend of HKD 0.6 per share, setting a new record for semi-annual dividends since the company went public. From a macro perspective, GMTEight believes that TSUGAMI CHINA's significant growth in core financial data is the result of a combination of internal and external factors. Considering the historical process of China's manufacturing upgrading, TSUGAMI CHINA is expected to fully seize the opportunities and continue to realize its long-term investment value. Seizing opportunities with full potential Despite the complex international situation and the industry's challenges, TSUGAMI CHINA has fully exerted its subjective initiative. Looking at the financial report, in the first half of the fiscal year, TSUGAMI CHINA's various businesses achieved significant growth, showing the solid fundamentals of the company. According to the data, TSUGAMI CHINA's core business of precision lathes generated revenue of RMB 2.051 billion, accounting for 82.1% of the company's total revenue, a 19.4% increase year-on-year. During the same period, the revenue from precision machining center business contributed RMB 207 million, with its share increasing significantly to 8.3% from the previous year's 4.1%, representing a revenue volume increase of 157%. The precision grinding business also recorded strong growth in the first half of the fiscal year, with revenue increasing by 47.5% year-on-year to RMB 126 million, accounting for 5.1% of total revenue. In addition to these businesses, TSUGAMI CHINA also contributed revenue from precision thread rolling machines, spare parts sales, and after-sales services, amounting to RMB 113 million, a year-on-year increase of 19.8%. In the first half of the fiscal year, TSUGAMI CHINA's sales in the domestic market increased by 39.2% and 11.4% respectively compared to the previous quarter, reaching a record high of RMB 2.35 billion. Behind this record-breaking performance is TSUGAMI CHINA's continued efforts in various downstream industries to seize industry growth opportunities. Automobile industry is the most important downstream application field for machine tools, with data showing that in 2024, the automotive industry accounted for 25.6% of the performance scale among all downstream industries. TSUGAMI CHINA continues to win market and customer recognition with its high cost-effective products and solutions. Data shows that TSUGAMI CHINA's revenue from the domestic automotive industry in the first half of the fiscal year reached RMB 1.03 billion, representing a 51.6% year-on-year increase and accounting for approximately 44% of the company's total domestic revenue. TSUGAMI CHINA's performance in the 3C industry in the first half of the fiscal year was also remarkable, with revenue reaching RMB 190 million, an increase of 29.7% and 28.3% compared to the previous quarter. During the same period, revenue from the pneumatic and hydraulic industry reached RMB 160 million, also achieving a positive growth rate of 4% year-on-year. Special attention should be paid to the fact that TSUGAMI CHINA's revenue from other industries saw a significant increase during the first half of the fiscal year, reaching RMB 970 million, with year-on-year and quarter-on-quarter growth rates of 38.6% and 49.2% respectively. Among them, AI liquid cooling technology played a key role in contributing to the increased revenue, generating RMB 120 million during the period. While consolidating its strengths in existing sectors and continuously exploring new markets, TSUGAMI CHINA's revenue indicators have consistently reached new highs. Additionally, thanks to the company's continuous efforts in cost reduction and operational optimization, TSUGAMI CHINA has also improved various profitability indicators, with a gross profit margin of 34.6% and a net profit margin of over 20%, establishing itself as a leader in the machine tool industry. Outstanding growth and stable high dividends With a new round of growth cycles, TSUGAMI CHINA, which continues to realize high-quality growth expectations, has reached new heights in investment value. In terms of growth visibility and resilience, considering both short-term and long-term perspectives, the ongoing technological changes in the automotive industry, as well as the rapid development of artificial intelligence and Siasun Robot & Automation technology, are continuously driving the demand for micro-precision components. This long-term trend is expected to provide continuous growth momentum for TSUGAMI CHINA. Facing opportunities with certainty, TSUGAMI CHINA is expanding into emerging markets. For example, in the area of AI liquid cooling technology, TSUGAMI CHINA's main product, automatic lathe processing tools, has a clear advantage in producing direct-pass liquid-cooled fittings. By signing equipment orders with dozens of customers in the first 9 months of the year, which account for approximately 5% of the company's total domestic orders, TSUGAMI CHINA is well-positioned to gain more incremental revenue from this market in the next fiscal year. In the field of Siasun Robot & Automation technology, which is still in the exploration and research stage, TSUGAMI CHINA is closely monitoring developments. It is reported that the company's various equipment can be used to process core components of humanoid Siasun Robot & Automation such as planetary roller screws, harmonic reducers, and planetary reducers. In the first 9 months of the year, TSUGAMI CHINA has also signed equipment orders with dozens of customers, involving automatic lathes, turret lathes, external cylindrical grinders, and thread rolling machines. Considering TSUGAMI CHINA's prominent market position in the domestic machine tool industry, its future performance is expected to benefit from the volume growth in high-value areas such as artificial intelligence and Siasun Robot & Automation. The latest financial performance once again confirms TSUGAMI CHINA as a high-quality growth stock. Additionally, the company's dividend attributes have been further strengthened in this interim report. As mentioned earlier, TSUGAMI CHINA plans to distribute a mid-term dividend of HKD 0.6 per share, its highest mid-term dividend since going public. Looking back over time, TSUGAMI CHINA has cumulatively distributed HKD 5.16 per share since its IPO. The stable and increasing dividend payout, combined with the company's high growth characteristics, points to the same value signal - TSUGAMI CHINA is a highly valuable investment target. It is not surprising that the company's stock price has continued to rise since the start of the uptrend in 2023, showing signs of further acceleration this year. With strong growth and stable high dividends, TSUGAMI CHINA's future performance is expected to continue to demonstrate the strength of the strong.