China Automotive Systems, Inc. Q4 FY2024 earnings call

• Quarterly business highlights: Q4 2024 net sales of steering products up 18.6% YoY; full year 2024 net sales $650.9M (+12.9% YoY).
• Gross profit 2024 up 5.2% to $109.2M, but gross margin 16.8% vs 18% in 2023.
• R&D expenses in 2024 were $27.6M, lower due to more investment in EPS and autonomous driving.
• Operating expenses rose 4.2% vs net sales +12.9%, showing focus on profitability.
• Net income 2024 $30M vs $37.7M in 2023. Cash dividend of $0.80 per share paid in August 2024.
• Celebrated 20th anniversary of NASDAQ listing.

In the fourth quarter of 2024, net sales of steering products increased by 18.6% year-over-year. For the full year 2024, net sales rose by 12.9% year-over-year to a record $650.9 million. Traditional steering products grew by 4.3% year-over-year, while electric power steering (EPS) product sales rose by 29.9% year-over-year. Henglong's domestic sales to passenger vehicles were up 20% in 2024, with sales to Chery Auto 18.2% higher, and KYB's EPS product sales up by 27.2%. Chinese commercial vehicle market sales were $71.6 million. North American operations had lower sales in 2024 due to reduced demand from Stellantis, while Brazilian sales experienced a 5.7% increase. EPS sales represented 38.9% of total revenue in 2024 compared to 33.8% in 2023.

• Management provides revenue guidance for full year 2025 of $700M, based on current operating and market conditions which are subject to change.

• Prolonged disruption or unforeseen delays in manufacturing, delivery, assembly processes could result in delays, increased costs, reduced revenue.
• Chinese economy challenges such as declining population, sluggish consumer demand, deflationary pressures, low fixed asset investment, overcapacity in some industries, and strain relations with major trading partners could impact business.

Q: For the 2025 year, the projection is for sales to grow by $50 million. What areas will generate this growth?

A: 2025, the majority of sales increase will be contributed from EPS sales, specifically from products like CEPS, TPEPs and REPS. Expecting a 30% year-over-year increase in EPS volume and a 400,000 units increase in volume unit volume in 2025, which will contribute to significant revenue growth.