China Yuchai International Limited Price & Performance (CYD)

Thank you for joining us today, and welcome to China Yuchai International Limited's conference call and webcast for the second half and fiscal year of 2024 ended on 12/31/2024. Joining us today are Mr. Wei Meng Ho and Mr. Chunsen Liu, 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, MTU Power Company. Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward looking statements within the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, target, 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 two 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 Form 20 F under the headings Risk Factors, Results of Operations and Business Overview and in 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. Hill will provide a brief overview and summary, then Mr. Liu will provide the financial results for the second half and full year ended 12/31/2024. Thereafter, we will conduct a question and answer session. For purposes of today's call, the 2024 results are unaudited and the 2023 financial numbers are audited, and they will be presented in RMB and U. S. Dollars. All financial information presented is reported using the International Financial Reporting Standards as issued by the International Accounting Standards Board. Mr. Ho, please begin your prepared remarks.

Thank you, Kevin. We are pleased to report that our unit sales outperformed the Chinese truck and bus vehicle markets in the second half and for the full year 2024. According to data from China Association of Automobile Manufacturers, CAAM, compared with a 9.9% year over year decline in truck and bus vehicle sales in second half of twenty twenty four, our truck and bus engine sales were up by 1.6% year over year. For the full year 2024, our truck and bus engine sales rose by 17.2% year over year compared with a 2.6% year over year decline in truck and bus vehicle sales. Our operating Jain sales rose by 12.6% year over year in second half twenty twenty four and by 9.1% year over year for 2022 for full year. Agricultural engine sales were flat in 2024, while industrial engine sales were up by 11% year over year. Marine and genset engine sales increased by 25.5% year over year. Revenue in 02/2024 was flat compared with the same period last year. Revenue in 2024 rose by 6% year over year to RMB RMB2.7 billion. Gross profit increased faster than revenue rising by 14.3% year over year in second half twenty twenty four and ten point eight percent year on year in full year 2024 to RMB2.8 billion or US392.1 million dollars compared with RMB2.5 billion in FY2024 twenty three.

Gross margin increased to 40.7 compared with 40.1% in FY2023. The increase in gross margin was mainly attributable to higher revenue and continued cost reduction initiatives. Although our operating profit decreased slightly in FY2024, Our investment in associated companies and ventures delivered higher profits, growing by 80.2% year over year in second half twenty twenty four and by 63.6% year on year for full year 2024. Our fiftyfifty joint venture MTU HCI Power, which sells large power generated engines achieved higher profit than the previous year. Our YC engine and PRM HIFI businesses achieved profitability in FY2024 compared to losses last year. Generated engine sales remain robust. Additionally, ICHI's marine and Genstep Power subsidiary and Rolls Royce Power Systems division have entered into a second phase operation and development for MTU Yichai Power Venture. As part of this development, production and sales of MTU Series 4,000 oil and gas engine is expected to begin shipment in late twenty twenty. But Manufacturing capabilities will be enhanced accordingly to cater to the expanded Jinjin Pork product portfolio. In 2024, Yichai Machinery Power Systems Thailand Company on Yichai, Thailand for mass production operations. Yichai, Thailand will mainly produce a range of diesel engines and other products for on and off road applications.

We have additionally, we entered into a comprehensive strategic cooperation agreement with Kimlong Motor Q of Kimlong Motor, a subsidiary of Vietnam's Foothaan Group. This strategic cooperation consists of the grant and provision of technology licenses, component supply and related support and services for the construction of a factory in Timlong's Motor's designated site in Pena. Timlong Motor obtained technology licensing rights from certain Yichai engine models to be manufactured primarily for trucks, buses and other commercial vehicles. Gimlom will have exclusive rights sales rights for the license engines in the Renan market along with priority sales rights in other ASEAN countries and South Korea. These licenses are valid for fifteen years with total licensing fee of US38 million dollars The operating in China was challenging in 2024. According to the National Bureau of Statistics, Chinese GDP increased by five percentage points year over year in 2024. The total value of our export rose to US3.6 trillion dollars both of goods and services creating a trade surplus of almost US1 trillion dollars last year for twenty twenty four. However, property investment continued to decline in 2024. In the second half of twenty twenty four, our R and D total R and D expenditures including capitalized costs increased by 21.2% to RMB326 million or $101,000,000 representing 8.2% of revenue in second half twenty twenty four as compared to RMB499.2 million representing $6,800,000 of revenue in second half twenty twenty three.

For FY2024, total R and D expenditures including capitalized costs were RMB1.2 billion or $165,400,000 representing 6.2% of revenue compared with RMB1.1 billion representing 5.9% of revenue in FY '20 '20 '3. We continue to improve the efficiency and performance of our National VI and Tier four engines and initiated the development of the next generation emission standard engines for the on road and off road engine markets. We continue the development of new energy products, including products using alternative fuels such as hydrogen technologies. Our innovative new energy powertrain include two hydrogen powered combustion engines and off gas power generation system and a production plant which utilizes off gas discharges to generate power and eliminate greenhouse gas emissions. The model YCA-07N hybrid engine, which was chosen to power 10 meter gas electric hybrid buses in Nanjing. The first fifty Suzhou Jinglong buses using our hydrogen fuel cells has commenced commercial operations in Beijing. And most recently, a new foray into enhancing wind power with the launch of the high strength QT700-ten turbine, planned main shaft to improve wind turbine performance. In recognition of our innovative achievements whilst which utilizes hydrogen, Guangxi Chain Engineering Company Limited, our main operating subsidiary in China was appointed as a committee member of the new Hydrogen Conversion Engine Innovation Consortium, division of China Internal Conversion Engine to Science.

To encourage improved performance, selected senior leaders and key employees of Weechai and its subsidiaries have participated in a key incentive plan beginning in 2024. The plans are both a reward and incentive to motivate these senior leaders with key talents for their continued contributions and that has NDA dedication and loyalty to enhance long term growth of the company. In early June, we adopted our first share buyback plan, whereby we repurchased a total of 3,300,000.0 shares amounting to a total cost of US39.8 million dollars In addition, the company paid a cash dividend of US0.38 dollars per ordinary shares on 08/28/2024. This share repurchases and dividend distribution demonstrate the company's confidence in our future revenue, profit and cash flow generation and to show our commitment to building shareholder value. Despite the shared bridge purchase and cash dividend, our cash and bank balances were RMB6.4 million or US895 million dollars as of thirty one December twenty twenty four. With that, I would now like to turn the call over to Mr. Junsing Lu, our Chief Financial Officer, who will provide more details on the financial results. So, Zheng Yi may begin your remarks.

Thank you, Wei Ling. Now, let me review our unaudited six months results ended 12/31/2024. Revenue was RMB8.8 billion or 1,200,000,000 compared with RMB8.9 billion in second half twenty twenty three. The total number of engines sold in second half twenty twenty four increased by 10.9% to 163,843 units compared with 147,700 units in second half twenty twenty three. The increase was mainly due to higher sales in truck, bus, industrial and marine and power generation markets. The better performance in truck and bus engine sales was achieved despite a decline by 9.9% in sales of commercial vehicles, excluding gasoline and electric powered vehicles compared to second half twenty twenty three as reported by the China Association of Automobile Manufacturers, CAAM. Gross profit increased by 14.3% to RMB4.1 billion or $195,700,000 from RMB1.2 billion in second half twenty twenty three. The increase was mainly due to higher unit sales volume combined with lower material costs. Overall gross margin was 15.9% in second half twenty twenty four compared with 13.9% in second half twenty twenty three. Other operating income increased by 31.2% to RMB401.5 million or $25,900,000 compared with RMB306.2 million in second half twenty twenty three. The increase was mainly due to higher government grants, higher rebate on value added taxes and recognition of technology licensing fees.

Research and development R and D expenses increased by 25.6% to RMB591.1 million or US82.2 million dollars compared with RMB470.5 million dollars in second half twenty twenty three due to higher more costs and impairment of a different new RMB project. Total R and D expenditures including capitalized costs were RMB $726,000,000 or US101 million dollars representing 8.2% of revenue in second half twenty twenty four as compared to RMB599.2 million, representing 6.8% of revenue in second half twenty twenty three. Selling and general and administrative SG and A expenses increased by 25.1% to RMB1.1 billion or $147,000,000 from RMB844.6 million in second half twenty twenty three. This increase was mainly due to higher trade receivables provision and higher traveling, personnel and selling expenses compared with the same period last year. SG and A expenses represented 12% of revenue for 2024 compared with 9.5% for 2023. Operating profit declined to RMB160.1 million or $22,300,000 from RMB231.8 million in second half twenty twenty three. The operating margin was 1.8% compared with 2.5% in second half twenty twenty three. Finance costs decreased by 20.4% to RMB37.1 million or $5,200,000 from RMB46.5 million in second half twenty twenty three, primarily due to lower field discounting.

The share of financial results of the associates and joint ventures grew by 80.2% to a profit of RMB58.5 million or US8.1 million dollars compared with RMB32.5 million in second half twenty twenty three. The improvement was mainly driven by higher profits at MTU Yichai Power Company Limited, MTU Yichai. Additionally, YXI Engine Company Limited, YXI Engine and Guangxi program Yichai Automotive Energy Termini Limited program Yichai achieved profitability in second half of twenty twenty four compared to a loss in the same period last year. Income tax was RMB26.4 million or US3.7 million dollars compared with RMB37.9 million in second half twenty twenty three. Net profit attributable to equity holders of the company was RMB82.7 million or $11,500,000 compared with RMB107.1 million in second half twenty twenty three. Basic and diluted earnings per share were RMB2.19 or US30 dollars compared with RMB2.62 in second half twenty twenty three. Basic and diluted earnings per share for SMA2024 and 2023 were based on a weighted average of 37,809,894 shares and 40,858,290 shares respectively. Now we will review the unaudited financial results for the fiscal year ended 12/31/2024. Revenue was RMB19.1 billion or $2,700,000,000 compared with RMB 18,000,000,000 in financial year 2023.

The total number of engines sold in financial year increased by 13.7% to 356,586 units compared with 313,493 units in FY2024. The increase was mainly due to higher sales in the truck, bus, industrial and marine and power generation markets. The stronger performance in truck and bus engine sales was achieved despite a 2.6% year on year decrease in sales on commercial meters excluding gasoline and electric power meters in financial year 2024 as reported by CEAM. Gross profit increased by 10.8% to RMB2.8 billion or US392.1 billion dollars compared with RMB2.5 billion in FY2023. Gross margin increased to 14.4% compared with 14.1% in financial year 2023. The increase in gross margin was mainly attributable to higher revenue from increased unit volume and continuing cost reduction initiatives, partially offset by greater labor and OA expenses. Other operating income increased by 30.1% to 575.1 sorry, RMB 575,700,000.0 or U. S. $80,100,000 compared with RMB 442,400,000.0 in financial year twenty twenty three. The increase was mainly due to higher diamond grants, higher rebate on better asset taxes and recognition of technology licensing fees. R and D expenses increased by 12.3% to RMB984.7 million or 137,000,000 compared with RMB876.6 million in financial year twenty twenty three mainly attributable to higher boat costs and impairment of a new PONNIO IT project.

ESR have continued with its initiatives to enhance the ENGIE efficiency and performance of its National VI and Tier IV emission standard combined engines, marine power generation applications, while enhancing new energy solutions. Total R and D expenditures including stabilized costs were RMB1.2 billion or US35.4 million dollars representing 6.2% of revenue for financial year twenty twenty four compared with RMB1.1 billion representing 5,900,000,000 I'm sorry representing 5.9% of revenue for financial year 2023. SG and A expenses were RMB1.8 billion or US252.1 million dollars representing 9.5% of revenue in FY2024 compared with RMB1.5 billion representing 8.3% of revenue in FY 2023. This increase was mainly due to higher trade receivables provision and higher traveling, personnel and selling expenses compared with financial year 2023. Operating profit was RMB597 million or $83,000,000 compared with RMB609.4 million in financial year twenty twenty three. The operating margin was 3.1% compared with 3.4% in financial year twenty twenty three. Finance cost decreased by 22.2% to RMB78 million or $10,800,000 from RMB100.2 million in financial year twenty twenty three, primarily due to lower deals discounting. The share of financial results of the associates and joint ventures increased by 63.6% to income of RMB101.5 million or $14,100,000 compared with income of RMB32.1 million in financial year twenty twenty three.

The improvement was mainly driven by higher profits and MTO Yichai. Additionally, YYNC Engine and program Yichai achieved profitability in financial year 2024 compared to a loss last year. Income tax expense declined by 13.3% to RMB228.8 million dollars or $13,900,000 as compared with RMB 148,500,000.0 in financial year twenty twenty three. Net profit attributable to China Sea Chai's shareholders was RMB323.1 million or US44.9 million dollars compared with RMB285.5 million in financial year twenty twenty three. Basic and diluted earnings per share were RMB8.21 or US1.14 dollars compared with RMB6.99 in financial year twenty twenty three. Basic and diluted earnings per share for FY2024 and FY2023 were based on a weighted average of 39,357,763 shares and 14,858,290 shares respectively. As of 12/21/2024, the Company's outstanding shares were following a share buyback plan reduced to 37,518,382 from 40,858,290 shares as of 12/31/2023. Now we will go through our balance sheet highlights as of 12/31/2024. Cash and bank balances were RMB6.4 billion or US895 million dollars compared with RMB6 billion at the end of financial year 2023. Trade and bills receivables were RMB8.8 billion dollars or US1.2 billion dollars compared with RMB7.8 billion at the end of financial year 2023. Inventories were RMB 4,700,000,000.0 or US647.5 million dollars compared with RMB 4,600,000,000.0 at the end of financial year 2023.

Tricks and bills receivable were RMB 8,500,000,000.0 or $1,200,000,000 compared with RMB 7,600,000,000.0 at the end of financial year 2023. Short term and long term loans and borrowings were RMB2.5 billion or US239.1 billion dollars compared with RMB2.5 billion at the end of financial year 2023. I will now turn the call over to Kevin for a comment for Q and A section.

Thank you, Chen Xin. 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. With that operator, we are ready to begin the Q and A. Thank We will now take our first question from the line of Yiming Liu from Haitong Securities. Please ask your question, Yiming.

No. This is Yiming from Haitong Securities. Thank you very much for having me. So, I have two questions. Number one is about your data center generator business. So it looks like your JV with MTU got a very good result in '24. But I'm just wondering how many units did you sell from both sides, I mean from both GE and YCL you are controlling interest and from the MTU JV? This is my question number one.

Okay. Calvin, can we take the question please?

Hi. Regarding on the genset sales and genset engine sales and then from 2024, our MTU joint venture sales is about more than 700 units. But this is including not only not all for data centers, this is including the other applications. And for the GYN, so the high horsepower we saw last year is about 1,000 no, no, no, it's about 800, yes, altogether, yes. But that is again, it will be including other applications, yes.

Okay. All right. Thank you. So just a continuation of this question. So looks like MTU JV was very profitable. And so I wonder what is the probability of your of this type of generators in the GM YCL, either in terms of like gross margin or net margin or something like that? Thanks.

I'm sorry, we cannot call the margin of the two different type of engine because in terms of the output or in terms of the performance in both engine, and I can meet with the requirement of the data center requirement. And they have the very similar power range and suitable for major streamline of the data center construction. And so I would take this way. And then the MTU is because of international branding and that there will be some premium and that the end user would like to buy them. And but for price wise, I cannot make any comment.

Okay. Understood. Thank you. So my question number two is, what is the expected growth rate on the data center generator business in 'twenty five?

If it's possible, could you describe separately for GM YCL and the JV business? I wonder if there's any difference and what is the expected growth rate in 2025? Thanks.

I would take it this way. The no matter the GYMCO or MTU joint venture, our order book for 2025 is already full. And then we are actually and then we are refusing further order because we cannot take any due to the capacity is constrained or due to the component supply. But I would say, and then the in the twenty twenty fifth, it's a very significant growth in compared to last year. It's at least 30%.

Okay, great. Thank you. So just one more additional question. So it looks like the profit attributed to the minorities in the second half of 'twenty four was pretty high. I just covered it. It looks like it was like 47% of the total profit. So, would that be a constant value in the future? Because in the past, it looks like it was like 30% or so. Thanks.

Okay. Let me answer that question. Compared to the past, I think the performance of our associate companies has been significantly better, in particular MPO because as you alluded to earlier, where there's a big growth in demand for the data centers, which fits right into our product offering. And at the same time, our other associate companies, joint ventures, there are a couple of steps, most of the ones that have turned from losses to profitability. So that's why this year we're seeing the largest whiteboard number for our whiteboard associate companies. Okay.

All right. Thanks. I'm sorry, just one more question. So looks like there's an item called other operational profit or something, which is pretty big. It was like RMB500 million in 2024. So I wonder how to expect that in the future. So is that going to be like proportional to your revenue or something like that? Thanks.

Sorry, can you repeat the question?

Pretty big item in income statement called All right. We have lost the line of Yiming. So we'll take our next question from Peng Yu Bai from Pinpoint Asset Management. Please ask your question, Peng Yu.

Hi. Actually, I have a question is, are we going to raise our price since the demand for the two megawatts generators in China, AI DC is very strong. And as we know, the supply is fixed. So in the future, both regarding 2025 and also 2026, are we going to raise our price for the generator? That's my first question.

Well, I mean, in terms of raising price, I think we will, of course, there will be some improvement in the pricing. But as it stands now, we haven't had any significant plan to increase in the big rig, but we believe there will be some improvement in prices.

Okay, got you. So as I understand, we are going to increase our price, but it's not right now, maybe maybe in the future. Okay. My next question is, are we going to produce the generator set or the module by ourselves since we only produce generator right now? So are we going to do the set in the future if the demand is not too strong?

There's no plan for that. We are actually engine manufacturer. So we only produce we produce the engines mostly for our OEM customers. If there is any customers basically want us to produce a genset, we can work on that, but that will not be our main business.

Okay. Got you. Got you. So my last question is, as I just heard that we already produced anyway 700 or 800 generators in the last year. So what is our capacity plan for 2025 and also for 2026, are we going to increase it by a very strong number, for example, above 100%? Can you actually give us some color in this question?

Kevin, you want to take that question. Kevin, So are we going to expand our capacity for a very large number in the future in this year and actually we have Actually, and then we have the planning and then to increasing our to expand our capacity since last year. And the but the two I mean, there's two different made by good category and then we have to consider. First is regarding how can we increasing our supply of the casting for the big engine on the like the cement engine block and engine heads. And then that machine so we the majority of the machining center and then will be arrival Yuchai and then by mid this year. So, likely and then by end of this year and then we can increasing our capacity. And we will be gradually ramping up. And so the next year and then will be about 35% to 40% increase, and then will be another third up on the 2027. So this is our current planning on how to try to meet up with the market demand.

Okay, got you. So you just mentioned that the growth rate is about 30% to 40%. So at least for this year, we are going to have more than 1,000 to two megawatts generators capacity in this year, right? It's more than 1,000?

Yes, yes.

All right. Got you. And I believe that's all my questions. Thank you.

Thank you. We will now take our third question from the line of Andy Li from Daiwa. Please ask your question, Andy.

Hi. Thank you much for taking my question. This is Andy Lee from Daiwa. Yes, I just want to quickly clarify, I think I heard another 30% capacity up in 2027, right?

Yes, by 2026, yes.

Hello? Hi, Amit. We are start building capacity now. The capacity will come on stream by 30 basis. Can you hear us, Andy, Andy Lee?

We lost it.

Can you hear us?

No, I can't hear anything.

Yes. We have lost it there.

We have lost the line of Andy. If you have further questions, please request to rejoin the queue. I'll be turning back to the presenters in the room for webcast questions.

Okay. There are a few questions for our webcast. The first one we'll read out now. Is the surge in demand for digital engines driven by AI data centers, will will that have impact on the revenue growth? Could you give us some color on both revenue and net profit impact from AI? And now, yes, there's a big demand now for data centers segment of business. We expect to see growth in it, significant growth as we discussed earlier. So yes, that will have an impact on our revenue growth for that particular segment. How is that going to impact our overall line our business revenue or our whole group revenue there? I don't think we are ready to release that part of the that information. And we can't unfortunately, I can't tell you exactly how much revenue it is for this segment nor the profit net profit impact for this segment. Okay. So the next question is from Jack Siau. Congratulations of your great performance. Currently, an explosive growth in the CapEx of major Chinese Internet companies leads to significant shortage of power generators. Have you entered domestic data center market with major clients? Is there room for price increase?

What's your future expansion plan? Can you share your overall outlook for data generator business of IDC sector this year? Kevin, you want to take that? Kevin, can you answer this question?

Can you repeat the question?

Oh, you can't see it. Okay. Let me answer it then. Okay?

I can't see it. Yes.

Okay. All right. So sorry, Kevin is calling from China, so he probably can't see the question. Okay, let me answer some of it, right. So they enter domestic data center market with major clients. Yes, we have entered China domestic market and we have orders from some of the big data centers, ISO operators in China. We also not only that, we also expect it to the sanitation market as well. So yes, if there is room for price increase, we think there will be improvement. But again, a lot of these data centers are for sales achieved through tenders. So in the case of tenders, the price is actually quite transparent, right? So we do expect a little improvement by the disclosure. So I don't think it will be huge improvement unless everybody also increase the price accordingly. So it's still a very, very competitive industry out there for datasets. What is your future expansion plan? We are building capacity to cater to the huge demand that we saw this year. So we expect the capacity to come on stream next year in 2026 for both our self GXL as well as the MTU. And can you share your overall outlook for diesel engine diesel generator diesel of IDC sector this year?

We believe this year is going to be specifically growth that will not demand out there still. So and this demand has not been quite satisfied as of this year. As Kevin mentioned earlier, our order book is full for the year. So we will expect to see more demand next year, I would say. But by then the capacity for most of the diesel generators and the jet side manufacturers OEM will also increase accordingly. So we believe that a lot of the demand will be satisfied in the next two years. R and D, your next question is from Jay Tan. Your R and D expenses grew between 2022.4% in excess of revenue. What type of R and D expense growth should we expect in 2025%? Was it moderate? Okay, Mr. Gul will answer this question.

Hi, J. Chang. Thank you for your questions. Yes, we expect the 2025 will remain pretty much the same or slight increase. What happens is that we are balancing the market demand, right? So we have commercial retail and then we have off road marine power generation and industrial and so forth. So we are very similar to spend, but overall, RD spend will continue to maintain that to improve our engine efficiency and performance. That we will not slow down, we'll continue to do that. And but overall expense perspective, we will still maintain and we will have a moderate increase in that sense.

Okay? So next question again from the same person. Does management expect a growth acceleration in 2025 on the back of the National VI National Board Trust traded policy? Yes, we do hope to see some acceleration, but it's very hard to determine how much that will be for now. Yes, the charter is yes. The last question on the website page is, your SG and A expense increased a lot in second half Q4. Could you please give us some guidance on the trend going forward?

Okay. I will take this question. Lastly, thank you for your question. Yes, in fact, our second half twenty twenty four, our SG and A expenses are mainly they increased mainly caused by the paid receivables provision, right? So that we have accounted for that in 2024. Although the market is still challenging, we expect that will be better in the 2025 in terms of our trade receivable provisions. So other than that, the spending the SG and A spending will pretty much remain the same as the 2024 level. But of course, when we continue to expand our participatory and overseas market, that we expect slight increase from that perspective.

We will now take our next phone question from the line of Andy Li from Daiwa. Please ask your question, Andy.

Hi, I'm back. This is Andy. My line was cut off. Hope my phone work properly this time. Yes, thanks for the clarification, Paul. So my question is on the associates and JV profit. This accounted for around over 30% of your second half profit. So just wondering, could you please break down how much is from MTU Yuchai? And I also know you have different lines of production lines for MTU. So can you walk us through which lines are for the large power generators applicable for data centers, please?

Kevin, do you want to take that question?

I mean, regarding on the product wise, the M2 product at the moment and then we had different cinder configuration. So we had the 12V, 12V and a 16V, 16 cylinder and also the 20V, that's the 20V. So I mean, I would say this way, the bigger the engine and the better the return because of the limited I mean the competition because of the high horsepower engine. And the I mean, but it will always and that depends on the customer requirement. So our joint venture, we were manufacturing then according to the customer spec. But of course, we can have the product mix and then can have a more higher power engine and they will be more benefit to the operation.

Yes. And, let's see, for example, any number or percentage the entity in China contributed to our profit?

Sorry, I cannot I think I gave you the figure, yes.

Okay. Okay. So do you start to negotiate with the data center clients and what does the competition look like? Did you encounter any Chinese peers in the bidding or kind of competition?

I mean, the genset market is very, very competitive because in China and then the it's always it's an open tender and then from the telecommunication operator or from the AI and then for example from the beta dance and then so it's transparent. I mean if you want to then the we understand the winner, what surprised they are at the end of the day. So I would like to say very fierce competition and that's why and then the I mean, there's a very difficult and to raise the bar of the pricing at this stage even though the very high demand because and then we had to make sure and then we can win the bid of the major projects and then from those key payers because in one single tender it could be up to 200, three hundred or 500 engines. So that's just a very careful and then the regarding on the pricing. So competition is too peaceful, yes.

Got it. Thanks for the color. Maybe lastly on your capacity expansion, what keeps you up at night? Any bottleneck you spend most of your time addressing on like maybe super alloy, inconeloid, hestoloy? Yes, I appreciate if you can share any color on this. Thanks.

It's a little bit different between the GY MCO and the MTU joint venture. MTU joint venture, actually, we had a problem of the supply chain because there's still some component we had I mean, we are imported from Germany. And there's a shortage of some of the key component from our parent from our partners. And this is a handicap the overall assembly of the engine. So I mean our partner, MTU, and then they are also doing some more investment and then they also work with their supplier and then try to ease up the supply chain issue. Hopefully by next year and then we can have more available resource and then we can take more engine orders.

I see. Any chance you can use to Chinese domestic supplier in replace of those imports?

We actually, we have what we call the localization program. And so we will localize and then the majority of the key majority of the engine component in China. And but there is some of the very key component and then the our partner and then we certify and then to not to localize and then that we had to buy from them anyway. So this is some of the bottleneck sometime here.

Got it. That's all for Mark. And also congratulations on the results.

Thank you.

Thank you. Our next question comes from the line of Yining Liu from Haitong Securities. Please go ahead, Yining.

Hello. This is Yining again. Thank you very much for having me again. So I was cut off, so I'm trying to continue with my question. So from your income statement, there is a big item called other operating income, which is $576,000,000 in the fiscal year 'twenty four. So I wonder if this value is proportional to your revenue or if there is other factor that is impacting that. So how do we accept that in 'twenty five or in the future? Thanks.

Hi, Yiming. Thank you for your questions. Yes, in that line, we have this government grant income, right, as I mentioned earlier on, right? So that is based on the revenue that we the income that we recognize according to the projects that we earned during the period. So that's due by the timing. So the second part is the VAT rebate, right. So there's a tax policy that for us, we are in this advanced technology zone that we are qualified or we are eligible for that incentive. So basically we get a rebate for the VAT tax, right. So that's another big part contributed the income for 2024. So that from our understanding that we subject to the applications each time. So once we are successful that will continue in 2025 if we are successfully applied. So that another part is the licensing fee, right, for that Regnan team loan, right. So we have recognized half of that US28 million dollars in 2024. So that, for me, was the big increase in our other income.

So, can we treat the majority of this value as recurring? Or I mean, what is percentage of this value which is not recurring in the future? The growth in term is subjective that how much we can recognize based on the value earned for the project. So that is probably we need a pretty much flat, right. But VATs, we base that subject to the repetitions and also subject to the VAT equal and outgoing offset, right. That is still yet to be determined. Yes. Of course, that might be free income, as I mentioned, we recognize that half of it from what we have awarded, right, RMB28 million. So that we shall see some in 2.025.

Okay. I guess that's it. Thank you very much.

Thank you.

Thank you. I'll now turn to the room for webcast questions.

Okay. We will answer some of the questions from the webcast. The next question down is from Robin Siau. For data center generator, is there any particular part source from third party? Could this what any bottleneck is answer that for MTU. So there is a part that we buy from Germany, which will be which will cost a bottleneck. So I think you guys addressed that question. The next one, go down to what is your capacity, CapEx plan this year and next year given the strong demand? Will there be new share repurchase? Our CapEx plan this year and next year will be probably still remains about the same. There will be more of course the resources that we channeled towards data centers since that's a big demand for it. But that has already started, right? So we have to see what the demand is going forward and how much capacity they are in the whole industry before we decide on more capacity expansion or more CapEx on that new year. Will there be a new share repurchase plan? I can't see that we haven't discussed this since the last plan that was implemented. So, yes, for now, this has not been discussed.

Can you share your revenue breakdown by domestic sales and export sales? And help us understand how product mix will ship in 2025 and the impact on ASP profit gross margin. I will answer the top part, but probably not the scale part, it's too sensitive for us. So in terms of domestic sales and export sales, about close to more than 20%, twenty % to 25% of our engines in terms of unit sales are exported. So it's grown by fact in the last few years. In the case of how the product needs to shift, it was the whole for the entire group, it will shift slightly more towards the marine and biogeneration, which is a jet set because of the big demand that we're facing now from the data centers. So that will have an impact on the ASP for sure and also gross profit margin. We will consider more share buyback program and what's the dividend policy, okay? We have addressed the share buyback program. The dividend policy, we do not have a formal dividend policy. But if you look at the dividend payout in the past, you'll get an idea as to how we decide on the dividend payout, but we do not have a formal dividend policy.

Thank you. We will now take our next phone question from the line of William Grigosecki from Green Breach Global. Please ask your question, William.

Hi. On Kim Wong, when is the expected start date that you'll ship the engine kit? And do you have a number of units you expect to sell and a rough margin profile for those?

Sorry, I need to ask that. Can you repeat that again?

Yes. On the Kim Long, when do you expect to start shipping the engine kits? And then do you have an estimate on the number of kits and margin profile for those?

Kelly, do you have any other question?

So, we need to help them and then to build up the whole plant and also we need to assist them and then to purchasing the all the equipment for the factory. So, I would expect and then after all and then all this, I mean, the installation commissioning and that is done and then also the carry on further testing of the whole line. And then it will be take at least about nine to ten months also by the end of this year. If everything is moving and we may start shipping the parks, this is my estimation.

Okay. Do you have an idea of how big this plant is going to be or how many units they expect to do a year?

In fact, the market is quite a good design market. I mean, because from GYNCL, our export to Vietnam is about 20,000, 20 5 thousand per annum. And so, I mean, if they take off most of those and then the orders, we previously and then we shipped from China and then there will be around this number. But I will, of course, and then it will be depends how is the competitiveness of the Kinlung motor in the Vietnam market. So I mean, we didn't have any concrete sales number because our agreement with them is only a licensing agreement. And so that we will help them and then to build up the whole plant, then we will provide the component according to the actual demand.

Okay. All right. And then my last question is, do you have expectations for this year for the in vehicle engine just in general?

Can you repeat that again, Bill?

Yes. I was looking for if you can provide any expectations for in vehicle engines for this year?

You mean the total engine sales for the year?

Yes.

EV, you're talking about EV, are you? Are you talking about electric vehicles?

I mean, if you can break out the new energy versus the traditional, that would be even better.

I see. No, I think this year we sold about 356,000 engines, right?

So I assume segment by segment, we expect the vehicle engines to move within minus 5% to 5%, maybe even 10%. So it's pretty for the domestic market. So as for the marine and biogenization, we expect it to perhaps increase by about 10% this year. For the industrial and agricultural machinery, The Agricultural Machinery, I'm expecting to have a slight growth and Industrial Machinery, I think for the market, it will be quite flat, but we expect to see some growth in there as well. But sorry, I can't give you a number, but generally that's how the market is.

Thank you. We have now reached the end of our question and answer session. And now, I'll turn the call back to Kevin Tiz.

Thank you very much all for participating in our conference call. We wish each of you a good help and we look forward to speaking with you again next time. Thank you.