China Yuchai International Limited Aktie

Good day and thank you for standing by. Welcome to China Yuchai International Limited First Half 2026 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the call over to your first speaker today, Kevin Theiss. Please go ahead, sir.

Thank you for joining us today, and welcome to China Yuchai International Limited's conference call and webcast for the 2026 first half year ended on June 30, 2026. Joining us today are Mr. Weng Ming Hoh and Mr. Choon Sen Loo, the President and Chief Financial Officer of China Yuchai International, respectively. In addition, we also have in attendance, Mr. Kelvin Lai, General Manager of Operations of China Yuchai International.

Before we begin, I would like to remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, 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 to, 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 upon 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's 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 on today's call or otherwise in the future.

Mr. Hoh will provide a brief overview and summary, then Mr. Loo will provide the financial results for the first half year ended June 30, 2026. Thereafter, we will conduct a question-and-answer session.

For the purposes of today's call, the first half year numbers for 2026 and 2025 are unaudited. Financial results are presented in RMB and U.S. dollars. All the financial information presented is reported using IFRS accounting standards as issued by the International Accounting Standards Board.

Mr. Hoh, please begin your prepared remarks.

Thank you, Kevin. We are pleased to report continuing growth in sales and profit in the first half of 2026. Revenue increased by 13.9% year-over-year with a 10.9% year-over-year gain in engine unit sales. Our gross profit rose by 36.5% year-over-year to RMB 2.5 billion or USD 368.7 million with gross profit margin increasing to 17.1%.

Operating profit was 58.9% higher at RMB 988.2 million or USD 145.1 million. Profit attributable to our shareholders rose by 53.2% year-over-year to RMB 560.6 million or USD 82.3 million, with diluted earnings per share of RMB 14.81 or USD 2.17 in first half 2026.

Higher sales of our larger engines enhanced both our average selling price and profitability compared with the same period last year. Total truck engine unit sales were up 20.4% year-over-year, led by a heavy-duty truck engine unit sales increase of 47.3% year-over-year. Engine unit sales to off-road markets increased by 7.7% year-over-year in first half 2026, primarily driven by strong demand in marine and power generation markets, where engine unit sales increased by 42% year-over-year.

Our joint ventures and associates produced a 56.2% year-over-year growth in profits in first half 2026, propelled by higher sales and profit mainly from MTU Yuchai. Order demand for high horsepower engines continues to be strong. The combined production capacity for high horsepower engines across the MTU JV and Yuchai currently stands at approximately 5,000 units.

Sales for AI data centers by MTU JV and Yuchai's own brand grew to approximately 1,800 units in first half 2026. With increased engine technology content, advancing performance and environmental impact, we increased total R&D expenditures including capitalized costs by almost 13% to RMB 622.5 million or USD 91.4 million in first half 2026.

In addition to enhancing the quality and performance of our current products, we have introduced new innovative products in first half 2026. Commercial minibuses equipped with Yuchai's YCY24-65kW Flywheel Range Extender System, or YC-FRS, were launched in the heavily congested Hong Kong vehicle market. This new technology reduces the need for fixed charging infrastructure.

We also created a breakthrough in our alternative fuels program with our first high-pressure direct injection internal combustion engine capable of operating entirely on ammonia. We acquired 27.97% equity interest of Nanyue Fuel Injection Systems or NYDK in short. It was previously known as Nanyue Diankong (Hengyang) Industrial Technology Company Limited. This transaction strengthens our technology capabilities, access to new powertrain products and supply chain resilience. Since April 1, 2026, NYDK's financial results have been consolidated following Yuchai's acquisition of control over NYDK on March 31, 2026.

Our subsidiary, Guangxi Yuchai Machinery, that genset power company limited continue to process for its IPO application with the Hong Kong Stock Exchange. Upon completion, the listing is expected to provide the subsidiary with more resources to accelerate its growth while we remain -- we will remain the controlling shareholder of this subsidiary. This will enable us to continue to benefit from the subsidiary's long-term development while focusing additional resources on our other operations.

To further support our strategy of identifying and participating in emerging growth opportunities, we invested in and became a limited partner in Guangxi Yuchai Growth Fund, a private equity fund that invests in businesses focusing on innovative technologies.

At the end of June 2026, our cash management and cash flow from operations provided higher cash and bank balances totaling approximately USD 1.2 billion with lower borrowings, reflecting our commitment to delivering value to shareholders. A cash dividend of USD 0.87 per ordinary share for 2025 was paid in July 2026, compared with USD 0.53 per ordinary share for 2024 paid in 2025.

Our strong financial position empowers Yuchai's ongoing investment in product upgrades and new product development, which furthers establishment of our growing presence in selected international markets to support future growth. Our strategy remains to be to sell into multiple end markets with a growing and diverse product portfolio.

With that, I would now like to turn the call over to Mr. Choon Sen Loo, our Chief Financial Officer, who will provide more details on the financial results. Choon Sen, you may begin your remarks.

Thank you, Weng Ming. Now let me review our unaudited 2026 first 6 months results ended June 30, 2026. Revenue was RMB 14.7 billion or USD 2.2 billion compared with RMB 12.9 billion in first half 2025, a 13.9% year-over-year growth. Engine sales reached 277,684 units in first half 2026, an increase of 10.9% compared with 250,396 units in first half 2025. This growth was driven by stronger performance in the truck segment as well as in off-road applications, particularly construction machinery and marine and power generation.

Total truck engine unit sales were up 20.4% year-over-year in the first half 2026, outperforming the 5.8% year-over-year growth in overall commercial truck, excluding gasoline and electric vehicles sales reported by the China Association of Automobile Manufacturers, CAAM, in the same period.

Heavy-duty truck engine unit sales increased by 47.3% year-over-year compared with the 13.1% year-over-year growth in heavy-duty truck sales reported by CAAM. Light-duty truck engine unit sales rose by 23.6%, contrasted with a decline in light-duty truck sales according to CAAM. Medium-duty truck engine unit sales also grew 7.9% year-over-year.

Engine unit sales to off-road markets increased by 7.7% year-over-year in the first half 2026. The growth was primarily driven by strong demand in the marine and power generation markets, where engine unit sales increased by 42% year-over-year. Sales for industrial applications rose by 15.8% year-over-year, while engine sales for agricultural machinery declined by 18.9% in the same period.

Gross profit increased by 36.5% to RMB 2.5 billion or USD 368.7 million from RMB 1.8 billion in first half 2025. The increase was mainly due to higher sales volume, better sales mix and reduced warranty expenses. Overall, gross margin was 17.1% in first half 2026 compared with 14.3% in first half 2025. Increased sales of larger engines enhanced the gross profit margin in first half 2026 year-over-year.

Other operating income net decreased by 32.2% to RMB 150.2 million or USD 22.1 million compared with RMB 221.4 million in first half 2025. The decrease was mainly attributable to lower government grants and the absence of technology licensing fees income in first half 2026 as compared with that of first half 2025.

Research and development, R&D, expenses increased by 24.5% to RMB 593.4 million or USD 87.1 million compared with RMB 476.7 million in first half 2025, due to higher experimental and personnel costs and a lower level of capitalized project costs. Total R&D expenditures, including capitalized costs, were RMB 622.5 million or USD 91.4 million, representing 4.2% of revenue in first half 2026 compared to RMB 551.7 million and 4.3% of revenue in first half 2025.

Selling, general and administrative, SG&A, expenses increased by 12.2% to RMB 1.1 billion or USD 158.5 million from RMB 962.5 million in first half 2025. This increase was driven by higher personnel expenses and legal professional and consultancy fees compared with first half 2025. SG&A expenses represented 7.4% of revenue for first half 2026 compared with 7.5% of revenue in first half 2025.

Operating profit increased by 58.9% to RMB 988.2 million or USD 145.1 million compared to RMB 621.7 million in first half 2025. The operating margin increased to 6.7% in contrast with 4.8% in first half 2025. Higher operating profit and operating margin were achieved by increased sales and gross margin, combined with controlled growth in operating expenses.

Finance costs decreased by 16% to RMB 27 million or USD 4 million compared with RMB 32.2 million in first half 2025, primarily due to reduced term loans during the period.

The share of financial results of the associates and joint ventures grew by 56.2% to a profit of RMB 95.9 million or USD 14.1 million compared with RMB 61.4 million in first half 2025. The increase was mainly driven by higher profits at MTU Yuchai Power Company Limited.

Income tax expense increased by 85.3% to RMB 215.3 million or USD 31.6 million compared with RMB 116.2 million in first half 2025 primarily due to higher profits and the utilization of deferred tax assets. The effective income tax rate increased to 20.4% compared with 17.8% in first half 2025.

Net profit attributable to equity holders of the company increased by 53.2% to RMB 560.6 million or USD 82.3 million compared with RMB 365.8 million in first half 2025.

Basic earnings per share were RMB 14.94, USD 2.19 compared with RMB 9.75 in first half 2025, both based on a weighted average of 37,518,322 shares. Diluted earnings per share were RMB 14.81 or USD 2.17 based on a weighted average of 37,845,508 shares compared with RMB 9.75 based on a weighted average of 37,518,322 shares in first half 2025.

The company adopted the China Yuchai International Limited 2025 Equity Incentive Plan with a duration of 10 years, and granted share options in August 2025 and December 2025 respectively, with a total of 820,000 share options granted as of December 31, 2025. No comparable share options were granted in first half 2025 and half 2026.

Now we will go through some balance sheet highlights as of June 30, 2026. Cash and bank balances were RMB 8.1 billion or USD 1.2 billion compared with RMB 7.9 billion at the end of 2025. Trade and bills receivables were RMB 14.1 billion or USD 2.1 billion compared with RMB 11 billion at the end of 2025.

Inventories were RMB 5.8 billion or USD 844.5 million compared with RMB 5.6 billion at the end of 2025. Trade and bill payables were RMB 13.2 billion or USD 1.9 billion compared with RMB 11.6 billion at the end of 2025. Short-term and long-term loans and borrowings were RMB 1.4 billion or USD 210.1 million compared with RMB 2 billion at the end of 2025.

I will now turn the call over to Kevin for a comment for Q&A session. Kevin, please.

Okay. All right. So please note some officers of China Yuchai are remotely calling into the conference. This may result in a slight delay in providing answers to some questions. We apologize for any inconvenience and thank you for your patience. [Operator Instructions]

Now operator, we are ready for questions.

[Operator Instructions] Our first question comes from the line of Wei Shen from UBS.

Congratulations on strong results. My question is about the AIDC kind of volume guidance. So we have achieved like 1,800. And I think at the beginning of the year, we are targeting like 2,600. So any color into the second half of this year? This is first question.

And my second question is about the dividend. I noticed that the company announced 2025 dividend, but the payout ratio seems to be lower than 2024. So I'm wondering any color on this.

Okay. I'll take the questions on dividend, and I'll let Kelvin take the question on the AIDC. No, there's no particular reason. I think the payout ratio, if you look at our payout ratios in the past 10 years, it ranges from about 30% to 40%, sometimes a little bit higher, sometimes a little bit lower. So it's still within that range. So that hasn't changed. So yes, there's no anything untowards there.

[Indiscernible] Lai Chuen regarding on the volume of the AIDC. So in the first half and then the total volume of the AIDC from both the Yuchai and plus the MTU joint venture joint venture is 1,800 units. So that is for the AIDC only.

And for the second half and then we will expect the whole year and then will be around about 3,500 and more. So this is -- we have adjusted the production and also the sales volume of the whole year of 2026. And it means that there will be quite a significant growth compared to the year of 2025.

The next question comes from the line of Fuyin Liang of Bank of America.

Management, this is Fuyin from Bank of America. I have a question about our gross margin profile. So in the first half, we see that the blended gross margin improved quite a lot. Could you explain more about the factors behind whether it is due to the product mix change or our improving cost efficiency? And actually, I also want to ask the gross margin or the net margin on Yuchai MTU. So for the first half, our share of profit from associate and JV improved a lot. So what's the margin profile for Yuchai MTU currently?

So I will take the first question, right, regarding the gross margin expansion or improvement, right, from 14.3% to 17.1%. So yes, I think you mentioned earlier on that the first thing first that the product mix, right, the product mix actually drove the margin up particularly in the large engine or high power engine, right? So that gives us a nice uptick for the margin, right? So that's number one, okay?

And then we also mentioned that our heavy-duty engine unit sales has increased as well. So that also give us some favorable margin increase in that aspect, okay? Of course, the third point is that I think you also mentioned that we have continued to enhance our operational efficiency, right? That is actually will help our cost rationalization, right, in the first half. Of course, our first half, we also been affected by some unfavorable precious metal price increase. So that is kind of being offset against what we have been doing for the cost improvement.

I hope that I addressed your first question, Fuyin. Okay. Then the second question on...

Okay. I'll take the MTU question. So the -- actually, this year and 2026, the GP of the MTU joint ventures saw a little bit reduced and mainly because of the cost of the engine and also the -- there's some pricing pressure, and we had to offer further discount in engine, both to OEMs and also our partners. And the overall sales of the first half and then increasing by over 40%. And so the revenue and also the net profit is also increased, but net profit percentage is not as good as the revenue growth. But we are still maintaining about over 30% GP of the whole assets overall. So this is still quite promising on the net profit. Thank you.

Our next question comes from the line of Yiming Liu of Haitong Securities.

Congratulations for your strong H1. So I've got 2 questions. Number one, could you describe any progress on your gas engine product? Is there any chance that they could be used in the data center business for prime power, especially in North America? And another question on fuel cell. So could you describe any progress on your fuel cell business? Is there any chance that they could be used in the data center in the future?

Okay. Let me take the first part, Yiming, and regarding on the gas engine. So the gas engine actually is a traditional engine product and then it is available in Yuchai for many years. So when we develop the diesel and then the gas engine is also available. So it's a ready available product and ready for the market.

But you're mentioning about on the North American market. And then at the moment, our engine is still under the certification process. So now is waiting and then for all the testing and it can be fully done and then before we can release the engine and then for any other region. And at this stage, we still end up using our existing platform of the VC engine and then that is up to 2.5 megawatt for diesel and about 3 megawatt for the rail application. So we don't have exact timing regarding when we can -- I mean, get into the U.S. market. We are actually doing everything we can there. Thank you.

And can you repeat your second question again on the fuel cell?

Yes. So could you give us some introduction of your fuel cell business? And is there any chance that they could be used in the data center power generation in the future?

Well, I mean, our fuel cell unit is still in progress. We have been developing products in the past. We have some products that's been installed in the past, especially in Beijing. We haven't -- we have not started working on the power generation side of it. So I guess at some point in the future, it is a possibility, but that's definitely not in the short term. We have not -- do not have a product in the short term for power generation for fuel cell system as yet. Okay?

[Operator Instructions] We have a new question from the line of Natalie Ong from CGSI.

Congratulations on this good set of results. I have some questions regarding your AIDC capacity. I'm not sure if I heard this wrongly earlier. At the start of the call, you mentioned that your current capacity for high horsepower engines/DC engines is currently 5,000 for 2026. Is that correct?

Yes, that's correct.

So does that mean that actually there has been an increase in capacity? Because I think previously, you were guiding about 4,000 capacity for 2026.

Let me take this question. Last year and then our capacity for the high horsepower engine, I mean the combined Yuchai local brand plus the MTU JV brand and all add together is about 3,000 last year. And we had the capacity expansion program at the end of 2024, so that it was complete last year. So we had about -- increasing about 700 unit capacity for the high horsepower. But at the beginning of this year, then we also by then modified our internal process so that we had to subcontract out some of our machining process and to the external subcontractor.

Through this practice and then we can increasing about 1,000 unit capacity for machining. So now we have all add together and then total is about 5,000. So this is our current capacity for the high horsepower engine, so including then for those AIDC or non-AIDC application. We are still in the planning to further increase the capacity for next year. But I think we are now not had a final decision regarding what's the volume will be increasing and then for the next and then the year on this. Thank you.

Okay. So my understanding is that the capacity has increased due to outsourcing of certain machining requirements. Is that correct?

Yes. Yes, we contract out some of the machining process in the past and then we do all the machining in-house. But now and then we are using the external contractor and then to do some of the machining for us so that we can scale out and then further capacity and then to build more engine.

Okay. So does this mean that you're still guiding for 3,500 only AIDC, that means excluding those sold to non-AI?

That is -- it's AI only, yes. 3,500. Yes.

So that means we expect to sell all the capacity that we have, which is going to be 5,000 for the year?

Yes, this is -- yes, exactly. It is 5,000 for the year.

And to be clear, right, the ASPs for high horsepower engines, be it sold to AIDC customers or non-AIDC, the ASPs are actually similar.

Yes. Correct. And because the high horsepower engine is not only for application of AIDC, this is only for using the engine for the power generation. So the power generation can be using in the factory. You may be using in the commercial building. And then so there's quite a lot of non-AIDC application and then using the high horsepower engine as well.

That's perfect. Can I also check? I know some of your competitors have also been ramping up their manufacturing capacity. How has that affected your ability to command or maintain increase your average selling prices for these high horsepower/AIDC engines?

In fact, the -- I mean that because of the surge in demand of the AIDC engine in the high horsepower engine market, so not only Yuchai with MTU, but I mean all other engine manufacturers, they also do the same thing and then have the capacity expansion program. And then the beginning of 2024, 2025 and this year. So I think the market is still very competitive. And the engine supplier and then they -- I mean, they have to do whatever they can to win the order. Otherwise, the expansion program and then we will have to be -- I mean difficult then to get the return.

So the pricing-wise and then we haven't had any -- I mean, a real pricing increase compared to last year, except we have the cost increase and then from our suppliers and then coming by to the end user for all those additional costs [indiscernible] quite stable pricing, anyway, yes. Thank you.

One last question. I know you mentioned that you have not firmed up your capacity -- available capacity for next year. So do you mean to say that you could try to outsource more of this machining and maybe increase capacity? Or do you think that this will require expansion of lines and therefore, more CapEx spending?

Actually, we will do in a dual way. I mean, one is that we will further outsource some of the process. But we cannot outsource every process, I mean to the external supplier because we can do the -- what we call the first machining, the fine machining, we need to do it in-house anyway. So we still have to -- I mean, increasing some of the machinery and then for the fine machining process inside the factory. So we will have to do it both ways. And then also then try to increasing the subcontract processing.

And secondly, and then we still have to be increasing -- I mean to buy some more equipment and then for the internal process as well. So we will do the same. And we have some planning done or reasonable planning regarding on the capacity of next year, but we need to finalize and then before we absolutely put into action.

[Operator Instructions] At this time, we do not have any further questions from the phone or webcast. Allow me to hand the call back to Mr. Hoh for closing.

All right. Thank you all for participating in our conference call. We wish all of you good health and look forward to speaking with you again. Thank you. Goodbye.

This conference call, thank you for your participation. You may now disconnect your lines.

Good day, and thank you for standing by. Welcome to China Yuchai International Limited Second Half 2025 Financial Results. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to turn the conference over to Kevin Theiss. Please go ahead, sir.

Thank you for joining us today, and welcome to China Yuchai International Limited Conference Call and Webcast for the 2025 Second Half and Year Ended on December 31, 2025.

Joining us today are Mr. Weng Ming Hoh and Mr. Choon Sen Loo, President and Chief Financial Officer of CYI, respectively. In addition, we have in attendance Mr. Kelvin Lai, General Manager of operations of CYI; and the Chairman of MTU Yuchai Power Company Limited or MTU Yuchai Power.

Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, optimistic, confidence 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 to, statements concerning the company's operations, as 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's Form 20-F and 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 a press release made today for today's conference call or otherwise in the future. Mr. Hoh will provide a brief overview and summary, and then Mr. Loo will review the financial results for the second half and fiscal year ended December 31, 2025. Thereafter, we will conduct a question-and-answer session.

For the purposes of today's call, the 2025 2nd half of fiscal year numbers are unaudited. The 2024 2nd half year are unaudited and the 2024 fiscal year financial results are audited. Financial results are presented in RMB and U.S. dollars. All of the financial information presented is reported using the IFRS accounting standards as issued by the International Accounting Standards Board.

With that, Mr. Hoh, please begin your prepared remarks.

Thank you, Kevin. We are pleased to report strong sales and profit growth in second half and full year of 2025. For the second half, the revenue in the second half increased by 33.5% year-over-year to RMB 11.8 billion or USD 1.7 billion. Our gross profit increased by 28.4% year-over-year to RMB 2.2 billion or USD 317 million and our gross margin rose to 18.9%. Our operating profit increased by 193.1% year-on-year to RMB 439.2 million or USD 66.7 million. Basic and earnings per share improved by $108.7 million year-over-year to RMB 4.57 or USD 0.65. For fiscal year of 2025, revenue increased by 28.9% to RMB 24.7 billion or USD 3.5 billion. Gross profit increased by 44.3% in year-on-year to RMB 4.1 billion or USD 578.7 million. And gross margin rose to 16.5%.

Operating profit improved by 22.7% to RMB 1.1 trillion or USD 155.2 million. Please see and diluted earnings per share increased by 24.4% to RMB 14.32 or USD 2.04. Our revenue growth in 2025 second half and year was generated by higher unit sales in nearly every reported category. Gross profit and margin was enhanced by the increased unit sales volume, especially for heavy user [indiscernible]. Our off-road engine unit sales in 2025 increased by 13% year-on-year with Marine and genset engines and industrial each recording unit sales growth of over 24% year-on-year. The fast-growing demand for backup generators to provide reliable electric power for data center operations created rapid growth for our engines.

Combined sales of MTU Yuchai Power and Yuchai high-horsepower engines to data centers exceeded 2,000 units in 2025, up from 750 units in the prior year. To meet the expected increase in demand for our power generating engine production capacity attention is well underway. Exports were an important sales channel as our globalization has been increasing. Our agreement in Vietnam includes Yuchai support for construction of our partner production facility, which complements our Thailand production operation. Buses powered by Yuchai natural gas engines were delivered in Mexico, bringing the total Yuchai engine to 2,400 units for repurposing the new world Leon [indiscernible].

Our foundry began fresh delivery of advanced casting to Germany, demonstrating the acceptance of our casting product quality provide the customers. We are expanding our international sales and service support offices as we believe potential new international partnerships will strengthen our global reach. Our strategy remains to sell into multiple end markets with a growing and diverse product portfolio. R&D expenses increased by 37.3% to RMB 1.4 billion or USD 592.3 million in the fiscal year of 2025. Yuchai continues to enhance engine efficiency and performance of its special and Tier 4 emissions complied engines and power generation engines, progress continue while developing new energy products, including alternative fuel engines, using hydrogen, methanol and ammonia combustion technologies.

Total R&D expenditure, including capitalized cost was RMB 1.5 billion or USD 278.1 million. Our strategic alliances and joint ventures produced a 9.4% year-over-year growth in profit in 2025, propelled by higher sales and profit mainly by MTU Yuchai. Recently, we took variety of steps to strengthen our technological capabilities and supply chain resilience by improving access to key components and advancing our participation in critical technology development. We acquired a 27.97% equity interest in [indiscernible] industrial technology company, which is a national high-tech industrial leaders specializing into injection systems, including common rail systems, unit pump and mechanical parts.

In addition, we became a limited partner in the growht fund, a private equity focus on investing in emerging and invest in innovative technologies. Our indirect subsidiary on Yuchain Marine and Genset power company filed an application for listing with the Hong Kong Stock Exchange in January 2026. The potential listing is subject to review and approval by the Hong Kong Stock Exchange and relevant regulatory authorities and market conditions. We believe this action will provide more resources to enhance their operations growth, highlighting the company's confidence in future revenue, profits and cash flow generation. We paid a cash dividend of $0.53 per auditory share in July 2025 to show our commitment to building shareholder value. Cash and bank balances were over RMB 7.9 billion or USD 1 billion as at December 31, 2025.

With that, I'd now like to turn the call over to Mr. Choon Sen Loo, our Chief Financial Officer, who will provide more details on the financial results. Choon?

Thank you, Weng Ming. Now, let me review our unaudited 6 months and full year results ended December 31, 2025. For the 6 months, our revenue increased by 33.5% to RMB 11.8 billion or USD 1.7 million compared with RMB 8.8 billion in second half 2024. Total number engines sold increased by 28.7% to 210,913 units compared with 133,843 units in second half 2024. The increase in the total number of engines sold in second half 2025 was primarily driven by 9.2% year-over-year rise in truck and bus engine unit sales, which significantly outpaced the 3% year-over-year drove in market shares of truck and bus rates, excluding and electric power vehicles as reported by the China Association of Automobile Manufacturers, CAAM. Truck engine unit sales in second half 2025 rose by 39.4%, led by a 126.1% year-over-year gain in heavy-duty truck engines. Also engine unit sales increased by 7.5% year-over-year, led by strong growth of more than 22% in both industrial and marine and genset unit sales, offsetting [indiscernible] engine unit sales.

Gross profit increased by 50.4% to RMB 2.2 billion or USD 317 million up from RMB 1.4 billion in second half 2024. Gross margin increased to 18.9% in second half compared with 15.9% in second half 2024. The increase was mainly due to higher unit sales volume, a change of sales mix with high unit sales of heavy-duty and high horsepower engines and continuing construction initiatives. Other operating income decreased by 44.1% to RMB 204.5 million or USD 31.9 million compared with RMB 401.5 million in second half 2024. The decrease was mainly due to lower government grant. Research and development advances increased by 0.8% to RMB 804.9 million or USD 124.5 million compared with RMB 591.1 million in second half 2024, mainly driven by higher experimental costs, increased percentage expenses, higher more costs and impairments related to fuel cell development.

Total R&D expenditures, including supplies costs were RMB 934.2 billion or USD 108.6 million, representing 8.3% of the revenue in second half during '25. As compared to RMB 726 million or 8.2% of the revenue in second half in '24. Starting general and administrative, SG&A expenses increased by 4.9% to RMB 1.1 billion or USD 157.7 million from RMB 1 billion in second half 2024. This increase was mainly due to increased personnel expenses and higher consultancy fees, partially offset by lower accounts receivable provisions compared with same period last year. SG&A expenses represented 9.4% of the revenue in second half 2025 compared with 12% for the second half 2024.

Operating profit rose by 193.1% to RMB 469.2 million or USD 66.7 million from RMB 160.1 million in second half 2024. Operating margin was 4% compared with 1.8% in second half 2024. The increase was generated by higher unit sales volume, a change of sales mix with unit sales of heavy-duty and high horsepower engines and lower SG&A expense as a percentage of the total revenue. Costs decreased by 20.2% to RMB 29.6 million or USD 4.2 million from RMB 27.1 million in the second half 2024, primarily due to low bank term loans and reduced discounting. The share of financial results of the associates and joint ventures decreased by 15.1% in to RMB 49.7 million or USD 7.1 million compared with RMB 8.5 million in second half 2024.

the decrease was mainly due to reduced product NC engine limited.

Income tax expense was RMB 213.5 million or USD 30.4 million compared with RMB 26.4 million in second half 2024. The tax increase was due to higher profits in second half 2025 as compared with second half 2024 and higher deferred tax expenses. Net profits attributable to the duty holders of the company increased by 107.4% to RMB 101.6 million or USD 24.4 million compared with RMB 82.7 million in the second half 2024. Basic and diluted earnings per share was RMB 4.57 or USD 0.65 compared with RMB 2.19 in second half 2024.

Basic and earnings per share for second half 2025 and second half 2024 were based on the weighted average of 37,515,322 shares and 37,609,694 shares, respectively. Now we will review the unaudited financial results for the fiscal year ended December 31, 2025. Revenue increased by 230.9% to RMB 24.7 billion or USD 3.5 billion compared with RMB 19.1 billion in FY 2024. The total number of engines sold in FY 2025 increased by 29.4% year-over-year to 461,309 units compared with $356,586 units in FY 2024. Truck and bus engine units rose by 42.8% compared with CAAM data for retail market sales growth, excluding gasoline and electric power engines of 4.5% for 2025.

Total truck engine unit sales rose by 50.7% year-over-year compared with a 5.9% year-over-year increase from CAAM data for truck unit sales. Heavy duty truck engine sales increased by 18.1% year-over-year in 2025, followed by 34.2% year-over-year increase in medium-duty truck engines and 67.6% year-over-year improvement in light-duty truck engine sales. Off-road engine unit sales increased by 13% year-over-year with both industrial and marine and genset unit sales growth of more than 24% year-over-year, offsetting lower engine unit sales.

Gross profit increased by 44.3% in to RMB 4.1 billion or USD 578.6 million from RMB 2.8 billion in FY 2024. Gross margin increased to 15.5% compared with 14.7% in FY 2024. The increase was mainly due to higher unit sales volume, a change of sales mix to higher unit sales of heavy-duty and high-horsepower engines and continuing cost-reduction initiatives. Other operating income decreased by 22.5% to RMB 445.9 million or USD 63.4 million compared with RMB 535.7 million in FY 2024.

This was primarily due to lower bank interest income and reduced government grants. Higher expenses increased by 37.3% to RMB 4.4 billion or USD 102.3 million compared with $984.7 million in FY 2024 primarily driven by higher experimental costs, increased personnel expenses and impairment related to fuel cell developments. Yuchai have continued with its initiatives to enhance the energy efficiency and performance of this national 6 and Tier 4 emissions compliant engines and power generation engines for data center and marine applications, while also advancing its new LNG solutions.

Total R&D expenditures, including cost was RMB 1.5 billion or USD 217.1 million representing 6.2% of the revenue in FY 2025 compared with RMB 1.2 billion or 6.2% of the revenue in FY 2024. SG&A expenses increased by 14.3% to RMB 2.1 billion or USD 204.7 million, representing $8.4 million of the revenue in FY 2025 compared with RMB 1.8 billion or 9.5% of the revenue in FY 2024. This was mainly due to higher percent of expenses and consultancy fees as well as increased the sales and service expenses that partially offset lower accounts receivable provisions. Operating profit increased by 82.7% to RMB 1.1 billion or USD 155.2 million compared with RMB 587 million in FY 2024.

The operating margin was 4.4%, up from 3.1% in FY 2024. Finance costs decreased by [indiscernible] to RMB 61.8 million or USD 8.8 billion from RMB 78 million in FY 2024 primarily due to lower banker loans. The share of financial results of the associates and joint ventures increased by 9.4% to income of RMB 111.1 million or USD 15.8 million compared with income of RMB 101.5 million in FY 2024. The improvement was mainly driven by higher profits of [indiscernible] at MTU Yuchai Power Company Limited and increased profit program Yuchai automotive technology company partially offset lower profits and YC Engine Limited.

Income tax expense increased by 106% to RMB 329.3 million or USD 6.9 million compared with RMB 128 million in FY 2024. The tax increase was driven by higher profit in FY 2025 as compared with 2024 and higher deferred tax expenses. Net profit attributable to the company's shareholders increased by 66.3% to RMB 511.4 million or USD 76.5 million compared with RMB 333.1 billion in FY 2024. Basic and earnings per share rose by 34.4% to RMB 14.32 or USD 2.4 compared with RMB 8.21 in FY 2024. [indiscernible] share for FY 2025 and FY 2024 were based on the -- shares and 39.35 million shares, respectively.

Now we will go through some financial numbers as of December 2025. Central Bank paces were RMB 7.9 billion or USD 1.1 billion compared with RMB 6.4 billion at the end of financial year 2024, receivables were RMB 10.4 billion or USD 1.5 billion compared with RMB 8.8 billion at the end of FY 2024. Inventories were RMB 5.6 billion, USD 791.8 million compared with RMB 4.7 billion at the end of FY 2024.

Trade and bills payables were RMB 11.1 billion or USD 1.6 billion compared with RMB 8.5 billion at the end of FY 2024. Short-term and long-term loans and borrowings were RMB 2 billion or USD 287.4 million compared with RMB 2.5 billion at the end of financial year 2024.

I will now turn the call over to Kevin for a comment for Q&A.

Mr. Loo, 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 an convenience and thank you for your patience.

If you would like to ask a question in Chinese, please kindly translate your own question to English before turning to the management for answers. And before we start the Q&A, we would also like to announce that management will be attending the forthcoming Jefferies conference on March 19, the HSBC Conference on April 14 to 16 Bank of America Merrill Lynch Conference in Shenzhen on May 13, JPMorgan Conference on May 20 to 22 and the UBS conference in Hong Kong on May 26 to 29. If you are interested in a one-on-one or a small group meeting, please contact the salespeople at these banks. Given the tight leading schedule and travel plans, we will not be able to accept meeting requests outside the conference venues.

Now operator, we are ready for questions.

[Operator Instructions]

Okay. Operator, I've seen the questions online. Okay. So I'll read the questions from [indiscernible]. So the question is that, thanks for [indiscernible] congrats on the strong results by year-over-year. Can you potentially share more on much higher expenses in the second half where effective tax rate is about 44%.

Okay. I'm Choon Sen, CFO of CY. So I will take these questions. So I think this question is the tax expense, we should look at the full year, right? So from a full year basis, there's a 7% to 8% higher due to the deferred tax. So on a year-on-year basis, we wrote off about a net basis by $100 million. So that is actually noncash item. That is also due to the of accounting that we look at the future profits for all the entities and eventually, then we need to impair those deferred tax assets that should be shown to be assessed. So we -- the company has started to write off those deferred tax assets and reduce it to the level of -- to sustain for the future profit. That's also part of the accounting requirements that we have done that. Yes. So if you exclude that, so we will come down to about 20% to 21% effective tax rate on a year-on-year basis. So the changes is probably only about 12% if you look at 2025 and 2024.

Okay. I hope that answers your questions [indiscernible].

We do have questions from the phone line. The first question comes from Wei Shen of UBS.

My question is about the other operating income. I found that in 2024, it decreased a lot. And I'm wondering what's the reasons and what's the outlook in 2026?

Okay. I'm Choon sen, here. So your question is on the -- your question is on the operating other income, right? I just want to confirm your question.

Yes.

Okay. So the reduction is mainly due to the lower government grants. So in 2025, probably a lot of people on the call may know that they are quite tighten up the incentive policy issued by the Chinese government. So that has reduced substantially. It's actually half of the government grant that we have received in 2024 -- in 2025 compared to 2024. So if your question. Next question is that whether that will continue in this trend, right? That one, again, we won't project that what will be the incentive from the government. But for now, I would think that the trend probably will remain as 2025.

Okay. My next question is about the share of the joint venture profit in 2025 because we only have the combined results, we don't have the details. Can -- do you have the numbers for the MTU joint venture? What's the profit growth for the joint venture?

Well, we'll let Kelvin Lai answer that. He's the Chairman of MTU. He can tell you about it.

Okay. Thank you for the question. The joint venture last year and then they generate the net profit is about RMB 211 million. So they're increasing by 22% and then from the year 2024. But the sales volume and also the revenue is much higher, about 30% plus increase. The reason why the profit not as good as the volume sales or the revenue generated because of the product mix has been changed and we sold less the 20 cylinder engine and the profit and also the revenue is a little bit lower than the other version.

Our next question, we have the line from Fiona Lian from Bank of America.

This is Fiona from Bank of America. So I also have 2 questions for the management team. The first one is that in the second half in 2025, we see that the company's gross profit margin improved quite a lot year-over-year. So could you please elaborate more about the reasons behind? And is it because we have more delivery to the power generation clients so that we have a better product mix and hence, the higher gross margin? That's the first question.

Okay. Let me answer that question. Actually, if you look at the unit sales that we had disclosed in the announcement, the unit sales actually gone up by about 30%. So that's one of the major reasons why the profit improved is due to the increase in volume. And two, also because of our high horsepower engines, we sold more than we did last year. I mean, again, significantly more. If you look at our numbers again in the announcement, got up from 750 to 2,000. So those are 2 major contributors to the improved performance. Of course, with the higher volume that we have, higher unit sales, that will kind of leverage the fixed cost that contributes to the better gross margin too.

Okay. So I have a follow-up question. So given the better product mix in 2025, so what's our guidance for 2026?

It's going to be quite challenging, difficult to provide a good guidance in China. In China, the sales, a lot of it is due to government policies driven by government policies, right? So we haven't seen much yet. Last year, one of the biggest reasons for the increase in revenue or unit sales is because of the government policy, the replacement policy -- so that one has actually drove quite a fair bit of our vehicle sales and also quite a bit of our nonvehicle sales as well volume. So whether or not the government is going to continue with that and how strongly is going to push that next year is yet to be seen, and that will determine the impact on the overall unit sales growth. But however, the -- there is a bright spot. We see a lot of big demand in the data centers last year, and that has maintained, and we expect it to improve this year, but it's hard to give you a percentage of the growth. So I think we expect that to improve by double digit this year for the data centers. So overall, I think this year's non center sales is going to be more or less the same if the government continues with the policies last year.

So my second question is about our R&D expenses. So in 2025, we see that the R&D expenses increased over 30%. So looking at 2026, what do you expect the R&D expenses growth rate? And what's our key R&D focuses looking at 2026 and 2027...

Okay. Our R&D expenses growing by around about 5% of our revenue, right? So it goes same type of revenue. The other one that we should talk about is that what type of research, there are a few things that we're working on. One of them is, of course, the new energy side of things. We are still developing and continue to develop on the new energy side, particularly in the range of standard EVs and to try to get our system, which is already commercialized to be fact or developed into our customers' vehicles. And other areas will be new kind of new areas, new energy systems, things like ammonia, methanol and hydrogen power combustion engines other than fuel cells, right? So if you -- and also, the Chinese government is also considering introducing National VI emission standards in the coming 2 to 3 years. So that -- for that, we are also starting to do some R&D to get ourselves ready for that emissions requirement. So there are quite a few areas that we're working on in addition to continuous improvement on the product to make it more efficient and more fuel efficient as well. So there are quite a few areas working on.

Our next question comes from [indiscernible] CICC.

Congratulations. So I have 2 questions to ask. The first one is about the future business of the HPP engines. We noticed that Caterpillar has announced its reciprocating generators can be used as prime power for data centers. So how does a view this industry trend? And do we have some existing natural gas engine products and technologies to support this industry trend? This is my first question.

Kelly, would you like to...

Yes. Let me take this question, yes. The high horsepower engine, the business forecast and then it still depends on the development of those Internet service provider and then how fast they build the data center. So we do expect there will be still a growth in the year 2026 when comparing to 2025, but we don't have the exact figure because -- and then so far, then we don't receive -- I mean, the order order and then from the wireless customer. Regarding on your question regarding on the natural gas generator and then from Yuchai, then we do have our natural gas engine for the power generation. We have the technology and we had the right product as well. And our product, the natural gas engine will be very similar to the diesel engine. And then they had using our 16 VC engine and then that will be generated, I mean, about 2 megawatts for the power generation using natural gas. But so far and then the application of the natural gas for high horsepower is mainly on the industrial application at the moment because in the region of China or Asia and then -- I mean, the customer and then we are considering the cost of the engine and then they are not using the natural gas engine for the data center at this stage.

Very clear. So my second question is about our significant market share gain in truck and bus engines, especially in 2025. So how do you view the 2026 outlook for domestic truck and bus industry sales and whether market share growth can be sustainable? This is my second question.

Okay. So you're talking about vehicle engines, the major vehicle OEMs in the market, some of them are using our engines. In particular, I think we have been working with the vehicle OEMs for quite a while to get our engines certified and design into their vehicles. And 2 of them have already come to fruition last year.

Last year. So -- and that's why we see a big growth in our heavy-duty truck segment of the market, correct? So with that, we expect that to continue into 2026, barring any unforeseen. So yes, we do expect to see some continued growth in that area.

[Operator Instructions] Our next question comes from Yiming Lui from Haitong Securities.

So I've got 2 questions. So first one is about your backlog, especially for those associated with the data center business. So if we compare your backlog right now and like half a year ago, so I'm just wondering, is that getting larger? Or if you look at the demand and supply, so is the supply getting more and more constrained, it's getting more and more tighter. Is that what is happening for those data center engines?

Kelly? It has to be -- I mean, separate the operation because for the Yuchai brand high horsepower engine, most of the component supply, they are they generally come from the China. So that the -- I mean, on the supply side and then we didn't have much problem there. And then because they had providing the most component for our engine assembly. But the cost-wise and then they are increasing the price this year, mainly because of the raw material increasing recently. And so that cost and then our cost up. But for the joint venture side and we do have the bottleneck and then regarding on the supply because of the supply chain from our partners and from Germany and then they do have some constraint and causing the supply of the component will be limited and then for the operation in the Chinese joint venture.

All right. But I guess I didn't get it clear. So I'm trying to ask about your backlog, I mean, the order that you received from your customer. So is that -- is the size of that getting larger during the past few months?

No. I mean we are still working very hard to fulfill those requirements. And the -- I mean, the delivery and then so far is still about between 3 to 4 months anyway.

All right. Okay. And my second question is about exports. So do you see any like increase on your European business? And what is the like the detailed segment about that? Is that about like diesel engines or gas engines? Or I mean, what is the outlook of your European business?

Are you referring to high horsepower engine or referring to the truck engine?

Mostly about the large horsepower engine.

Okay. Yes. For the export market, if we referring to the Yuchai brand -- I mean, the Yuchai brand operation, our export markets only account for a small percentage, about 10% and mainly in Asia. But for the MTU joint venture side, there will be -- I mean, because we sell -- we sold our OEM, those and then we will have about over 20% or 25% of the export opportunity, and it's also on growing as well.

At this time, there are no further questions from the phone line. We have now reached the end of our Q&A session. I would like to turn the call back over to Mr. Hoh.

Well, thank you all for participating in our conference call. We wish each of you good health, and we look forward to speaking with you again. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.