Airtac International Group (1590.TW) Q2 FY2025 Earnings Call Transcript & Summary

Good afternoon, everyone. We already have Mr. Ivan Tsao from Airtac on the line. We're going to get started in about a minute or so. I appreciate your patience until then. Thank you so much. We want to wait for everyone to join. We're going to get started on 4: 02 sharp. Please wait for another minute or so. we already have Mr. Ivan Tsao from Airtac. We want to wait for everyone else to join. Once again everyone thank you so much for joining. We're going to get started in 30 seconds. Everyone there is some question about the voice issue. I believe our voice, both Ivan and myself, seems to be very much active. So please review your own system at this point. Thank you so much.

Let me get started. Good afternoon, everyone. Thank you so much for joining second quarter 2025 earnings call for Airtac International Group presented by Goldman Sachs Asia Industrials team. Today, we have Airtac International Group, ticker 1590.tw with us, one of the most focused popular automation company in Asia. It is our pleasure to welcome Mr. Ivan Tsao, CFO of Airtac. Ivan, thank you so much for your time today.

Thank you, Isyama-san, and good day, everybody. This is Ivan Tsao from AirTac.

Thank you so much. We, Goldman Sachs Asia Industrial team will be the host and the moderator of today's earnings call. We have Chao Wang, our Taiwan Industrials and Tech analyst; and myself, Yuichi [ Isyama ], Head of Asia Industrials. We'll be the co-host moderator of the call today. There are some statements we have to make beforehand. Today's call is strictly for clients, analysts or investors invited from Airtac International or from Goldman Sachs only. It is not intended for media and it's off the record. If you're not an investor or an analyst and did not receive invitation to join this call directly from Airtac or Goldman Sachs, you should hang up now. Also, please be remembered that this call is not for the purpose of sharing or receiving nonpublic or otherwise confidential information. Attendees are public side market participants who may not receive or should not request nonpublic or otherwise confidential information about issuers or about the markets or securities. For today's call, we are going to be starting with Ivan's presentation of second quarter earnings review and full year outlook commentary, followed by the Q&A session. [Operator Instructions] Thank so much for patience. I have nothing further to state. Ivan, the floor is all yours. Thank you so much.

Thank you again, Isyama -san, and good day, everybody. Welcome to join this call. And let me brief our second quarter results and current market situation. And first of all, more than 90% of our revenue and expenses are denominated in renminbi and renminbi is our functional currency. FX impact on our operating income level is limited. Our consolidated financial statements are settled in renminbi and then convert to NT dollar at a certain exchange rate. The recent sharp appreciation of NT dollar has not affected our actual operation financial data, but we are listed in Taiwan and have to report NT dollar term financial statements to Taiwan government. Stronger NT dollar results in a lower growth rate of our NT dollar term financial numbers. This situation just is only due to the conversion of the reporting exchange rate. In addition, observing the impact of the U.S.-China tariff issue, we thought most of the China customers have experienced the U.S. tariff since 2018. Although new tariff factors have had a partial impact on the China current economy mostly caused by psychological factors influence and this time will not be greater than that in 2019. Currently, for the recovery of the China economy, the importance of how the China government continues to implement more policies to restore people's consumption confidence and enterprises expansion willing to expand domestic demand is far greater than the impact of U.S. tariffs. For Airtac, we are still closely observing the development of the tariff and proposing corresponding strategy to continuous increase market share and support revenue growth. pneumatic industry still can sustain single-digit growth annually once there is no too severe noneconomic issues. And we still expect it could be flattish to low single-digit growth for pneumatic industry in China in 2025. By continuous developing new products and improving our brand image, we expect our annual revenue growth rate can be 10% higher than the industry growth rate. And our approved consolidated revenue for the second quarter of 2025 was RMB 2.12 billion, 11% growth year-on-year. Gross profit was RMB 967 million and 8% growth year-on-year. Gross margin was 46.0%. Operating income was RMB 641 million and 8% growth year-on-year. Operating margin was 30.5%, in line with our expected. Net nonoperating loss was RMB 38 million, including RMB 67 million of FX loss RMB 25 million subsidy from government, TWD RMB 7 million of interest income and RMB 3 million of interest expenses. Income before income tax was RMB 603 million, a 6% decline year-on-year. Pretax margin was 28.7%. Net profit was RMB 478 million, a 6% decline year-on-year. Net margin was 22.8%. EPS for the second quarter of 2025 was TWD 10.19 and it's TWD 19.8 for the first half of 2025. Revenue from top 8 industries for second quarter of 2025 -- the big one still was electronics, around 29% to our consolidated revenue. It is 6% growth year-on-year. Second one was battery around 14% to revenue, 117% growth. Auto was 10% to revenue, 35% growth. Packaging was around 8% to revenue, 1% growth. Machine tool was 7% to revenue, 2% growth. General machinery was around 5% to revenue, 11% growth. Textile was around 4% to revenue, 14% decline and LED lighting was 4% to revenue is around 35% decline year-on-year. For current market situation, -- there are still some customers who are watching the development of the tariff from the U.S. before they deciding their expansion plans. Uncertainties is always worse than a bad outcome as customers usually do not make major decision to expand their capacity. The recent tariff negotiation seems to be moving in a positive direction. In addition, China government continues to release many stimulus policies in past couple of months and attempting to restore people and corporate confidence in government policies. Some of them have improved their confidence and increased their end product consumption or increase their capacity expansion. The overall market demand was slowly recovering since late 2024 and over shipment was better than our expectation in Q1 of 2025, but just in line in Q2 of 2025, mostly could be affected by U.S. issue, psychological impact. As of the demand of various industry for pneumatic component in 2025, we expect electronics industry demand could be 10% growth in 2025 at the beginning of the year because so many customers say there could be more new model launch or new upgrade in 2025. Pneumatic supports customers' production process, not in their end product. Once customers have more new model launch or spec upgrade, they need more new assembly to support their production. However, due to some customers observing the develop of the tariff negotiation, especially those in consumer electronics industry or application, shipment in the electronics industry in the second quarter was lower than our original expectation. For battery demand, government announced its guidance for the EV and battery industry for 2025 in late last October and demand was accelerated from last November. We expect double-digit revenue growth from battery in 2025 and it's more than 1% growth in past 4 months, also was better than expectation. Moreover, government stimulus policies for replacing old equipment to be new equipment can get subsidy is still in the market. So many traditional application customers like machine tools, general machinery and packaging can enjoy positive growth for 2025 is mid- to high single-digit growth in the first half of 2025 and also better than our expectation from those traditional demand. Better revenue growth from automotive industry also could be expected for 2025. We have improved our brand image on auto customers and also enjoy better share gain in this demand. Even the overall auto industry have now recovered significantly, we have had double-digit revenue growth in past couple of years. And we expect double-digit revenue growth from auto in 2025, even in coming years, still could be expected and also has been better than our expectation in first half of 2025. We still have some demand issue on solar and also have suffered 50% decline in first half of this year. Even it still could be weak for the year. Its decline rate have narrowed from 55% in the first quarter to 8% in this June. In addition, it's just around 4% of our revenue and won't affect our business too much in 2025. Selective items for selected customers still have some pricing competition in pneumatic market, but it is rational basically. This week -- sorry, the weak of the Japanese yen will not affect the competition with our Japanese peers, mainly because the cost of material accounted for about 40% to 50% of pneumatic cost of goods sold. Most of the main material cost was metal materials. Japan's own production of metal should be limited. So it needs to purchase major material from foreign suppliers. The weaker yen will increase the cost of material, but it still can enjoy the benefit of Japanese production capacity in labor cost and overhead. In addition, the production capacity of main competitors in Japan is around 40-plus percent. Another 3% is in China. The currency impact should be similar to Airtac. So -- the stronger yen or weaker yen never affected the competition between Airtac and peers. Material costs have been relatively stable and fluctuate within a reasonable range, which will be friendly for our profit margin in 2025. But OP margin still has to depend on revenue scale and capacity utilization rate. Even we can improve our margins by launching more higher-margin new products, improving our selling product mix and continuing to improve internal efficiency to reduce production cost. Total days of inventory was around 124 days and it's around 117 days for receivable days at end of June. Both of those numbers are healthy. And our pneumatic capacity rate is around 10% currently and just around 30% for our capacity. For the demand of guide business, industry demand is still pretty weak and peers still keep aggressive pricing. We have changed our pricing policy since third quarter of 2024 and also extend new sales stretch from this February. Even shipment volume has been more than 20% growth year-on-year, but the lower pricing still have not improved our monthly revenue, obviously. We still expect we could have RMB 600 million revenue in 2025 and additional RMB 300 million for internal demand to support our pneumatic cylinder product. Also expect we can achieve 50% capacity rate at end of this year and the production gross margin of the guide could be around 30% and just around 20% in 2024 and first quarter even first half of 2025. If the rate is 80% gross margin could be around 40%. Even 40% gross margin is lower than our existing business. We use the same sales team to do cross-selling pneumatic and without too much additional OpEx, we still can improve our consolidated OP margin with continuous rate improving. Sorry about that capacity expansion, gross margin still will be improved. Pneumatic is a short lead time business. And no matter the economy is good or bad, pneumatic don't have to digest inventory in or customer side and its visibility is only around 1 month. Why is 1 month? Because the probability of the order delivery with 1 month is a little higher. We cannot ensure whether the demand for the next quarter will be better or better. We can only predict the annual shipment based on our experience, market situation and feedback from our customers. Uncertainties are still in the market. We as our China sales team and overseas sales team still have to do their best. And also as China sales team have to achieve 35% China pneumatic market share by 2030. That means additional RMB 2 billion to RMB 3 billion revenue can be increased from our China pneumatic business. Even our new guide sales progress is slower than expected, we still could have 30% China market share and around RMB 5 billion revenue in around 10 years from China business. And we were requested by our pneumatic customers to develop their electrical controller system demand. After 5 years of development and sales, we have had around RMB 400 million revenue in 2024, and it still could be better and better. also expect we could have RMB 2 billion to RMB 3 billion in 10 years and continue to develop electrical cylinder to support higher precision push power demand. And we have had part of include motor switch and motor and driver still in developing. And we still can support such demand when the demand is obviously improved. Just those 4 business can support Airtac enjoy double-digit revenue growth in the next 10 years. We expect whole year of 2025 can return to low single digit or flattish for the whole industry of pneumatic. And we still have 10% revenue growth at least from pneumatic product, plus the revenue contribution of business. We keep same guidance for revenue growth rate for 2025, low teens percent growth. OP margin could be around 30%. CapEx will be around TWD 2 billion to TWD 3 billion in 2025. We have generated free cash flow by TWD 6.4 billion in 2023 and TWD 8 billion in 2024, also have increased our cash dividend payout from 35% in 2021 to 55% in 2025. It still will be higher in coming years, and it could be around 60% in 2026. Lastly, in past 2 to 3 months, so many investors have asked me why we have decided to exit our U.S. market. This is a rumor spread by competitors. We are just changing our sales model to have our U.S. distributors place orders directly to our [indiscernible] factory with FOB terms, and we can reduce the potential risk of U.S. tariff. This is my briefing. Should you have any further questions, we can discuss it. Thank you.

Thank you so much, Ivan, for your presentation. Everyone, we're going to be moving on to the Q&A session. [Operator Instructions] Chao, the floor is yours. Please state your name and also the company.

This is Chao from Goldman Sachs. So my first question will be on the second half 2025 outlook. Given that you still believe that the overall China pneumatic market demand to be up a little bit year-over-year in overall 2025 and your revenue still outgrow the overall market by 10%. So I just want to know what is your thought on the second half demand outlook, especially from the electronics and also the auto and battery industry?

Yes. Basically, the shipment the daily shipment still was around 10% or 1% growth year-on-year year-to-date. And it could be -- it has been better in the first quarter. But second quarter, some of the customers have been affected by the U.S. tariff issue. But even affected by tariff issue, the shipment is still in line as our expected. So basically, we still expect the China government will continue to implement more stimulus process to restore people's confidence or improve their domestic economy. And even pneumatic still have its synergy. second quarter used to be the peak season. Third quarter will be decline single digit quarter-over-quarter. And monthly revenue in third quarter also will be lower than second quarter. But it's the similar seasonality in 2024. So even we have a lower monthly revenue in third quarter than second quarter of this year. The year-on-year, the monthly revenue year-on-year base still could be teens percent. So we still expect the demand of pneumatic still will recover gently or gradually. And second quarter used to be the peak season of electronics. And we will not expect electronics demand can sustain 10% or double-digit revenue growth for 2025, but it still could be mid- to high single digit for the whole year 2025, and it could be mid-single digit in second half of 2025. Auto is still pretty good. And month-to-date still has around 30% to 40% growth year-on-year. And I mentioned earlier, we have improved our brand image in auto customers. So basically, we still can enjoy better share gain from the market. And battery still could be better and even it has been more than 10% in the past 4 months and it could sustain such more than 10% growth year-on-year in the second half. It's still too early to tell, but it still could be high double-digit revenue growth for the rest of the year.

Thank you. And my next question will be related to the volume discount you provided to your key customers that you already expressed in the last few results calls. Just want to understand what is the result of this volume discount you provided to your customers in the 2025, at least year-to-date? And how should we think about -- is it the key reason why we see that the gross margin in second quarter 2025 to be less than the fourth quarter -- less than the last year second quarter 2024? Or is there any other reason we see that the gross margin to decline and OP margin to decline year-over-year?

Basically, lower gross margin OP margin in the past 4 quarters mostly caused by the issue. China have canceled some items tariff benefit between the street. And we have to relocate some production -- some product production from Taiwan factory to Nimbo factory. And such capacity still have to accrue depreciation expenses without any output. In addition, we still have to lay off some operator in Taiwan factory. And such situation could be better from third quarter of this year. But the issue between the still is there. We still will consider what product production be relocated is better for our consolidated basis. For example, some electrical controller product was produced in Taiwan factory by second quarter of '24 and the gross margin just around 30% to 40%. After we relocate such production to our Nimbo Phase II, such production -- such product gross margin could be more than 50%, but we have to suffer a couple of quarters low output or output to relocate such capacity. So basically, once year-on-year compared to base from third quarter of this year, we believe we will be year-on-year growth or improved.

Your next question is coming from Bill Lin.

I'm Bill-san from JPMorgan. So I think my question is also about the gross margin part. Apart from the impact of the and the production relocation, can you share with us about the pricing trend about Line pneumatic and the linear guide product? Also, I also want to understand what is the linear guide sales in the second quarter for you?

Okay. The pricing is still rational for pneumatic industry. But I mentioned, there's still selective items for select customers have selective price competition. And why we have project pricing discount or annual discount for specific customers, just for specific customers, not all the cross the customers because we try to approach more new customers or prevent some customers bothered specific competitors. And we still believe such pricing is successful in past couple of quarters. We not just can increase our market share, also can have a stable or much better relationship with specific customers. And we have a reserved for such pricing discount by RMB 6 million a month. It doesn't mean we will have RMB 72 million pricing discount for the whole year of 2025. So maybe in fourth quarter of '25, we will assess such RMB 6 million monthly discount reserve is too high or too low. Basically, it could be too high, then we can reverse such discount reserve. The pricing for [indiscernible] even peers still keep very aggressive pricing, but the pricing began to decrease aggressively from late '21 to mid of '24. And from mid of '24 to this moment, the pricing have been at low level or bottom. And most of the peers have not decreased their pricing further after mid of 2024. But the overall demand is still pretty weak and pricing have a little stable from mid of 2024, but still a very low level. You can see other peers, their gross margin OP margin in the past couple of quarters have been much lower than the past couple of years.

I think my second question is about what is the linear guide sales in second quarter, if you can share with us. I mean the linear guide sales in second quarter, how much is the numbers in renminbi, if you can share with us?

You mean the monthly revenue?

No, I mean the quarterly sales of linear guide in second quarter.

Quarterly sales is RMB 150 million.

t's Your next question is coming from Iris Zheng.

This is Iris Zheng from Deutsche Bank. So 2 questions. The first one is on profitability. I believe you've already answered like the bulk of it. I just want to double check what is the extra impact on the operating profit margin or on the gross profit margin in the first half. And I want to double check if my understanding is correct that you are basically implying that the gross profit margin and the operating profit margin should see a year-on-year growth or a year-on-year improvement in the second half versus the second half of last year?

Yes. Basically, we expect our quarterly gross margin, OP margin will be better in second half of this year compared to second half of last year quarter. And it's difficult to tell the exact impact for tariff in first half of this year because the production -- the product production and the volume of the production was pretty varied in past 2 to 3 quarters. But at least it could be more than 0.6% or 1%, but it's very roughly numbers for you. The impact [indiscernible] is and pretty so many impact factors of the OP margin impact by [indiscernible]

Understand. That's already very helpful. My second question is on the top line. So if we think about your target or guidance of the full year for the top line of being low double-digit growth for the full year, and I believe it's in RMB terms, right? And then we have 10% in the first half, then this implies a slight acceleration of growth in the second half of the year. And do you think this acceleration comes more from the market that can potentially pick up in the second half of the year? Or you think it's more AirTac can do better than the market?

Maybe both of them because impact from U.S. tariff may be well lower and lower because some customers may still have to make some decision for their capacity expansion. And we still will apply different kind of sales range, and we also have improved our brain. And we also expect we could have a better share gain from the market. And also because of the low base of second half of last year, and we can have double-digit revenue growth in second half of this year.

Your next question is coming from Jason if it is not working, please reconnect yourself. Let me move on to some of the questions that came through from the Sorry, Jason. Now we can hear you. Jason, I'm sorry, can you start from the beginning again?

This is Jason Lu from First Capital Management. My first question is about the environment. In the June and July, the China government announced the [indiscernible] or we say the [indiscernible] competitive policies. Do you see our clients be more conservative in the purchase or the future guidance?

Sorry, I cannot understand the you mentioned.

Sorry. My question is the [indiscernible] like an agent in their policy. Have you seen our clients be more conservative in the purchase of their confidence?

Basically, such kind of shipment will be still pretty similar to first quarter or first couple of months of the year. And some policy have some deferred impact. So it's still too early to tell such new policies will affect customers' behavior or not. We still have to observe that. But in past 1 to 2 months, we don't have seen too much change.

Okay. So my second question is for the second half year, the utilization rate of the linear guide, could you give us more detail for your expectation?

Basically, even we have overcapacity for years, but we still have to keep basic [indiscernible] rate to let our operator experience or accumulated experience. So 30% or high 20% retention rate will be kept in rest of the year. But once we have a better shipment, maybe we still depend on the shipment improvement and increase our [indiscernible] rate. So basically, we still expect we could have a higher [indiscernible] rate later this year, but we won't increase too much inventory, just want to keep our [indiscernible] rate.

Thank you so much, Jason. There is one question -- 2 questions coming from one investor. Let me ask that on behalf. Ivan, thank you so much for your time today. Please, can you clarify Airtac's U.S. strategy and the changes made in recent months in response to U.S. tariff? Are client letters suggesting the U.S. withdrawal entirely fixes is the first question. I appreciate if you can answer that, Ivan.

Yes. Basically, we have a sales subsidiary in Houston. And in past, we have built inventory for our direct customers and distressed customers. Then we have to import inventory and pay tariff first. And such inventory just stuck on our Houston warehouse. But it doesn't mean all those inventory can be go to our customers. So we have potential or thinking cost of the tariff expenses. And the so many fixed cost or expenses in U.S. is pretty high. For example, our Houston warehouse rental, we have to pay USD 70,000 a month. And the tariff still could be uncertainty. So from this, we have informed our customers include [indiscernible] and [indiscernible] customers. We will give them some pricing discount, but they have to price orders, they have to place orders to our [indiscernible]. And the trading term could be FOB [indiscernible] port, then we don't have to -- don't have to check the tariff for any customers. We not just can decrease our tariff sinking cost, we also can decrease our monthly warehouse rental. In 2024, U.S. subsidiary almost lost USD 5 million. And after we change such model, we can make money from U.S. subsidiary.

Thank you so much, Ivan. The second question is about electronics area. Ivan, thank you once again. Please, can you outline AirTac's competitive positioning within electronics? And any progress in penetrating into semiconductor manufacturing supply chains?

Yes. is a small company in past, and we started our China pneumatic business from traditional application. So many high application customers, they still have very deep bra for pneumatic suppliers. They always believed Europe better than Chinese made AirTac. So after 2011, 2012, we began to develop high application SKUs to support such higher application. But we still have to spend more time to improve our image. And we have success in past 10 years. So basically, not just improve our, we also have wider product portfolio can convince more electronics customers can trust Airtac is good enough and can support most of their demand. So many customers don't be afraid to be punished by their existing suppliers once Airtac don't have too wide or once Airtac can support most of their demand. And such happened in past 5 or 7 years. So it's one reason why we can continue to gain shares from the market because we have wider product portfolio also can enjoy multiplier effect to improve our market share. For Semi, in past, we have not focused on semi SK development because we have so many easy money items are not developed and launched. We prefer to do those easy money items first. And second one, so many semi customers have some abnormal requirement to AirTac such abnormal equipment, they have not pushed on other Chinese peers. So we don't think semi businesses are based business for Airtac. So we have passed -- we have not put it on our first priority and develop that. And third one, in past 1 to 2 years, China government had local procurement, local production process. So many local China semi equipment players came to Airtac actively trying to seek any with Airtac. After we such of all our product SKUs, just limited product can support customers limited demand. And our pricing just around 40% of SMC's pricing, we still can enjoy 70% gross margin from such demand. So from end of last year, our Board have authorized or even have to develop semi items aggressively. And this progress is still on track, and we talk to the market, maybe in 2 years, such semi revenue won't be improved, obviously, but it still could be higher and higher. And around 2 years later, it could be another growth engine for Airtac business.

Your next question come from Kenny Chen.

I have 2 questions. The first one, I just want to follow up on the impact from Airtac you just mentioned. Can we get some sense that will this continue to be impacting second quarter's margin or it will be totally resolved somewhere in the second quarter or third quarter?

Well, any impact or not in the second half of the year still depends on the [indiscernible] development. And any or any product production in Taiwan will be lower efficient than our [indiscernible] factory production. We still will consider to move some product production from Taiwan factory to [indiscernible] factory. And such process impact still depends on the scale of the product production relocation and we have to lay up additional operator in Taiwan or not. But basically, such impact won't be that high as it did in past 4 quarters.

Okay. Got it. Very clear. And the second one is kind of a relatively long term or maybe we have to wait and see. But I see your quarterly sales like have been increasing year-on-year for many quarters, but there still be a cycle for kind of industrial automation, factory automation in this kind of industry. So I'm wondering if you can give us just a brainstorm or any thought you have right now for 2026 or the next cycle? Will you see some more constructively positive views on 2026, 2027 or you will want to like warn some of downside risk going forward?

Basically, is very short term short lead time business. We cannot tell the situation in 2026 or 2027. And in past 20 years, every 2 years, we have an up cycle and another 2 years could be down cycle. So every 4 years is a cycle include down cycle and up cycle. And this weak demand started from late 2021. And mostly, it was [indiscernible] in first half of '21. China government want to calm down the overall demand. And second one, China government have some abnormal control for specific application, specific industry from September or October of 2021 and mostly was related to political issue. So we say this weak demand from later '21, we prefer not to define a cycle issue. This noneconomic issue to affect that. And after government has resolved most of the political issue and they try to restore China economy from late '23, but most of the people have lost to government policies, even some pretty strong enterprise also expand their capacity conservatively. And government continue to release more stimulus policies, but restore people confidence takes time. So even though may have been better from later 2024, and we also talk to the market, it just could be a gentle recovery, slight recovery won't be a rebound that did in first 2 up cycle. So basically, once just slightly recovery from late '24, and we also believe China government still will continue to release more [indiscernible]. So this recovery cycle from later 2024 will last longer than 2 years, but it still depends on China government process.

Your next question comes again from Chao Wang from GS.

This is me again. A little bit more housekeeping question from me. The first question is coming -- is related to your inventory days by end of this quarter -- sorry, end of second quarter? And how should we think about the inventory level going into second half this year for pneumatic and also linear guide? That's the first question.

Firstly, 124 days is too low for pneumatic business. And we still will depend on the shipment situation and some fixed cost and decide the attach rate in second -- third quarter or fourth quarter. Basically, we used to decline our attach rate from July or August of the year, and October will be the lowest one and increase our attach rate from late November or from December. But we still have to consider the inventory level is good enough to support our customers short lead time demand or not. So basically, 124 days at end of this June is not healthy. It's not good numbers for the production cost.

Got you. That's pretty clear. So we're basically implying that the inventory level will continue to go up in the second half and probably will not lower our utilization so fast in second half this year compared to the past few years.

Yes, that's, yes.

Got you. That's pretty clear. So my next question will be coming from the market share outlook or the market share in 2025 because we continue to hear some feedback from the Chinese industrial automation suppliers and also the customers saying that they are -- have better intention to buy localized local production products, just like your products compared to the Japanese peers or Germany peers' products. So I just want to understand the trend. Have you also see this trend happening? And should we expect that the market share to be higher than 30%, 35% probably next 1 to 2 years?

Yes. Basically, we have been seeing as a local truck company for years. And the situation you mentioned also have been happened in past 1 to 2 years, but it's not easy to denominate how fast it will be because different customers have different consideration all have different procurement behavior. But basically, we have very high confidence to enjoy 35% China market share by end of 2030.

We're actually just about to finish the time. If I may finish with one final question from myself, actually. Ivan, is there any changes in terms of cash flow outlook that you are having? I think you started to step up on the shareholder return from last year. Given the, I would say, rather moderate business condition that you've been seeing for this year, are you having any views that maybe you need to think more about the shareholder return going forward? Or you want to deploy further capital towards even further new businesses, including M&A and such. Any update on the cash flow, if you can mention about it as a closing remarks, that will be deeply appreciated.

Basically, we don't have any acquisition plan currently even in short term. And our CapEx just could be TWD 2 billion to TWD 3 billion in 2025, 2026, even 2027. And next CapEx expansion depends on the scale of our electric business. But even we have a little higher CapEx in 2028 or 2029, it just could be a little more than TWD 3 billion a year. And we still can generate pretty good free cash flow. So basically, the cash dividend payout will be higher or how high it will be still depends on our balance sheet situation. And once we have better revenue growth, we need more working capital demand because our cash cycle could be around 220 days. Higher revenue, we need more -- we need more working capital. But basically, to keep our payout ratio to be around 60% from 2026 to near term, it will be difficult for Airtac.

Thank you so much for that commentary. Everyone, we would like to conclude the call. And Ivan, thank you so much for pushing yourself despite the fact that you've been having a short road. We truly, truly appreciate your effort in here. If there is nothing further, we would like to conclude the call. Ivan, would you like to have any other closing remarks?

No.

All right then. Thank you so much, everyone, for joining today's call with Airtac International Second Quarter 2025 results. We hope that you're going to be having a great weekend ahead and hope to see you sometime soon. Thank you, everyone. The call is going to get concluded. Thank you, Ivan. Have a great day.

Thank you, Isyama-san, and thank you, everybody. Have a good day.

Thank you, everyone. We're going to close the call.