( Remarks by Chen Ze, Vice Chairman and President of HCD Group, at HCD Group 2026 Management and Operations Annual Conference )

Respected Colleagues of HCD,

Today, we gather once again at the new starting point of 2026, reflecting on 2025 with emotion while looking ahead to 2026 with determination. On behalf of HCD Group’s management, I first extend our respect to every HCD member for your daily dedication throughout 2025 and look forward to your continued efforts in driving HCD to new heights. Here, I express my sincerest gratitude to all colleagues!

01 Reflecting on 2025

The global political and economic landscape remained turbulent, with persistent tariffs and geopolitical conflicts, leading to unstable economic and market conditions. Industry competition has shifted decisively from "competing on scale" to "competing on efficiency, cost, and global expansion." Facing adversity, HCD has upheld common sense, embraced pragmatism, bravely broken through barriers, and welcomed change, confronting what is termed the "world’s most competitive market" with a proactive and transformative mindset. HCD Group’s operational performance remained stable overall, with steady annual revenue and cash flow meeting targets, although profitability fell short of expectations. Market share in core businesses remained largely balanced. Overseas performance in the North American market was strong and sustained, while domestic performance showed a decline. Technological and R&D innovation drove significant achievements, with breakthroughs in key technologies and multiple industry awards. We deepened industry-academia-research collaboration, accelerating the transformation of innovation outcomes and injecting new momentum into HCD’s industrial upgrade.

Amid the new economic cycle, market saturation, sluggish growth, and persistent trade barriers, HCD chose optimism and moved forward resolutely. Despite challenges, we remained composed, diligently developing our four business segments: Robotics and Automation, Final Assembly and Conveyance Automation, Logistics and Warehouse Automation, and Embodied Intelligence Applications and Technology Consumer Business.

Robot Automation Unit: Clearly implemented the annual operating principle of "reasonable revenue and restored profitability." Fully focused on core businesses, adhering to fundamentals and returning to the essence of operations. Deep reflection, confronting issues, and self-renewal are essential. We must steadfastly drive changes in innovation, efficiency, and operational models; advance overseas market expansion; leverage customer performance advantages; and actively collaborate with resources from subsidiaries in the U.S. and Mexico. This includes joint development of market clients in North America, South America, Europe, the Middle East, and Southeast Asia, as well as supply chain, engineering, and manufacturing synergies to achieve high growth in overseas business. The core lies in "daring to venture out, competing on efficiency and cost, and ensuring closed-loop budget control," executing annual OKR to lay a solid foundation for revival.

Final Assembly and Conveying Automation Unit: Influenced by international tariff policies, reliance on a single overseas client, and weak domestic orders, overall profitability declined. Overseas project capabilities and management systems require improvement. Leveraging technological advantages in new process equipment, intelligent warehouses, and AMR mobile robots, along with manufacturing cost advantages and overseas performance strengths, we will enhance synergies with joint ventures DMW and DMX in the U.S., focusing on client, product, and engineering collaboration. We will also explore business and technical cooperation in warehouse automation equipment with DMW&H in the U.S., as well as collaborative development in domestic and international markets.

Logistics and Warehouse Automation Unit: Demand in the postal and express delivery industries showed growth, with stable market orders. Retail and e-commerce businesses demonstrated strong performance growth. We expanded into adjacent markets such as beer and beverages within the wine distribution sector. Newly developed inventory software modules enhanced technological competitiveness and market expansion. Client demand for retail and e-commerce software modules remains high, necessitating strengthened technological development to boost competitiveness. We will explore business and technical collaboration with Hubei DMW, as well as joint market development beyond North America.

Embodied Intelligence and Technology Consumer Unit: AI is now deeply integrated into the real economy, presenting vast opportunities. The shift from "perceptive intelligence" to "physical execution" drives new industrialization and smart manufacturing. Multimodal AI combined with intelligent agents will form a complete closed loop of "Perception–Decision–Interaction–Feedback." HCD possesses rich industrial scenario data and expertise in complex environments, excelling in applying embodied intelligence to industrial settings. Innovations such as highly adaptable robotic simulation digital models provide first-mover advantages in industrial applications. Positioning toward a To C business model, we will advance both To B and To C segments, focusing on upgrading existing To B businesses while driving incremental growth through To C transformation, firmly igniting the "second engine."

02 Understanding a Simple Truth: "The Essence of Business Is Profitability"

Daring to self-criticize is a form of confidence. Denying ourselves is to embark anew. In 2025, cold, hard financial data taught us a simple truth: "The essence of business is profitability." It reminds us that "accountable management" is the core of managerial process control—not blindly chasing growth nor defeating competitors, but returning to the common sense of profitability. DEMC must deeply analyze the causes of losses. The fault lies not with others but with management itself. The root cause, plainly put, is that "the problem lies with the leadership, with management." Some managers remain complacent in their comfort zones, unwilling to change. In today’s fiercely competitive industry, using decade-old mindsets and methods in work and management will inevitably lead to failure, mistakes, and poor operational outcomes. In an unpredictable, rapidly intensifying market, sticking to routine signifies personal mediocrity and corporate peril.

HCD must resolutely innovate and transform outdated systems and management models. Solving the mentality of complacency and blind confidence is urgent. We must adhere to lean management, strengthen our foundation, and enhance the advancement of governance mechanisms and the concept of keeping pace with the times. The growth of management cannot be a case of "boiling a frog in warm water." Self-awareness is essential. We must further share responsibilities, authority, and obligations to unlock individual potential and inspire a "team spirit." Upholding the principle of "common sense as the guide, perseverance in action" ensures success. If one person practicing common sense in one matter is ordinary, then when all HCD employees—from top executives and general managers to front-line sales managers, project managers, engineers, and staff—learn, understand, and personally practice these simple truths, remarkable power will emerge. Today, every HCD member must practice common sense at work, challenge inertia, self subversion, upgrade cognition, persistently uphold operational common sense and concept, break the old to establish the new, engage in deep reflection, confront issues, and embrace change. Only then can HCD thrive perpetually.

In 2025, HCD’s competitive environment has never been more complex. Disruption in the competitive landscape is gradually unfolding, with new processes, technological changes, and new competitors offering similar or superior product delivery at lower costs. HCD must ponder: Who are our competitors? Colleagues in sales, solutions, project management, technical engineering, and supply chain—why can’t our strong team defeat competitors? Does our business value chain still hold competitiveness? The problems are evident. Why can’t we change? Why do we fear change? If we cling to industrial-era thinking and traditional methods, we will inevitably decline. We must discern the future, identify the path, clarify the way forward, and demonstrate the determination and courage to change. A rough beginning, grounded in action, always surpasses perfect imagination. This is the simplest approach for every HCD member to tackle complex situations and challenges.

03 "An Enduring HCD, An Evolving Business Portfolio": Everything Faces Restructuring

Today, in this era of great transformation, no competitive advantage is eternal, and advantages are increasingly short-lived. In the industrial automation sector where HCD operates, there is nothing to adhere to. We must hold change in high regard, rapidly iterate our capabilities, dare to experiment, and make quick judgments on uncertainties—be it in industry competition, operational models, industrial structure, business transformation, industry rules, mechanisms, new opportunities, or management logic. We believe that in any environment, there are good and bad enterprises. Only in challenging times can the quality of management be discerned, primarily through operational data, growth rates, profitability, and other metrics. In the international development of our businesses, we "woke up early but started late." What should have been with ease and ease, and effortless development has now become a matter of life and death. 2026 is a critical point for HCD to expand overseas markets and new product businesses. Facing a complex and ever-changing external environment, HCD must rationally "do the right things," adhering to the duty of management, and steadfastly "do things correctly," persisting in innovation and transformation, activating organizational vitality, increasing R&D investment, upholding operational common sense, and repeatedly doing the right things to gradually move toward success.

04 2026: Implementing Three Operational Principles—"Stable Profitability, Efficiency-Driven, Global Growth"

In 2026, HCD will fully implement three strategic pillars: "Stable Profitability, Efficiency-Driven, Global Growth."

First, "Stable Profitability" is undoubtedly the core of operational management and the essence for all HCD operating entities, ensuring profitability across subsidiaries and achieving overall stable profits. Second, "Efficiency-Driven": Enhancing efficiency remains the first principle for industrial enterprises. We will promote efficiency improvements across the entire value chain, drive structural growth upgrading, and uphold efficiency as the company’s eternal moat. Adhere to comprehensive cost leadership across the entire business chain , and deeply explore the efficiency space of itself, supply chain, sales, solutions, design, manufacturing, projects, engineering, inventory and other areas. Reduce waste, pursue continuous improvement, enhance digital development, break down data barriers for more precise decision-making, and improve supply chain Collaborative efficiency. By strengthening cost control and implementing a "digital + lean" management model, we will make "efficiency leadership" one of HCD’s core competencies. Third, "Global Growth" is the development strategy for the new year and the key path to achieving growth targets. The core lies in execution—decisiveness, personal commitment, and swift action. What is said must be done, persist until the end, and results must be seen. This is the inevitable path for HCD’s global growth.

05 With the Resolve to "Cut Off the Arm to Save the Body," Organizational Change Can Take Root

Today, HCD must not fear change but proactively drive it. What must we change? Dare to confront issues, engage in self-criticism, break free from past achievements, and avoid being dragged by path dependency. Our management must demonstrate the determination of "cutting off the arm to save the body," becoming "true warriors" by decisively shedding redundant businesses and inefficient assets, streamlining organizational hierarchies, daring to make decisions, acting swiftly, breaking mindset and structural inertia, and daring to "take action against ourselves" through six fundamental changes.

First, operational management objectives must change. Profitability is fundamental. "Accountable management" must prioritize overall efficiency and profitability (improving efficiency and profit metrics) as core indicators. Subsidiary management must undergo radical change.

Second, the growth model must change, forming a "troika-driven" growth approach. From the growth of existing old businesses to the growth of new industries, we will continue to promote endogenous growth: integrated business scale development, independent development of standard products, and increased reinforcement through mergers and acquisitions, to achieve a "troika-driven" growth model.

Third, innovation capability is the core competitiveness determining HCD’s future. Further increase R&D investment, advance product innovation profitability, develop To C consumer products, drive R&D in embodied intelligence digitalization, explore new business models, and seek new growth opportunities to gain a first-mover advantage in embodied intelligence applications and technology consumer sectors.

Fourth, continue to promote HCD Digital Management 3.0 Lean Transformation. Build a Full Value Chain Lean Management HCD Business System (HBS): Establish a lean talent system, develop methodologies, and create a lean system for production. Integrate lean management with digitization seamlessly, connecting the most advanced digital and intelligent technologies with management systems to provide HCD with an "action plan to navigate cycles."

Fifth, since winter is inevitable, we must face it squarely. We are confronting the world’s most competitive market. There is no distinction between others' advantages or our disadvantages; the operational environment is fair to every competitor. The market rewards the best performers and helps us become our best selves. Competition may become fiercer. HCD must perform better than before, outperform competitors, minimize errors, and comprehensively implement the principles of "Stable Profitability, Efficiency-Driven, Global Growth" as our norm to ensure sustained and stable operational development.

Sixth, only when inertia is broken by ourselves can change truly take root. In recent years, we have consistently spoken of change. Why has change not materialized? In practice, we are trapped in inertia of thought and behavior, within comfort zones. Can change occur? We believe that if every HCD member breaks inertia, change will happen. Change arises from each individual’s desire. Only through change can we reborn.

06 HCD’s Method to Navigate Cycles—Building a Full Value Chain Lean Management HCD Business System (HBS)

When confronted with challenges such as the new economic cycle, market involution and sluggishness, and weak growth, HCD must rely on its own established methods of operation to counter environmental uncertainties. We are determined to dedicate efforts to build the full-value-chain lean management HCD Business System (HBS). This includes developing a lean talent system, creating methodologies, establishing a lean production management system, and seamlessly integrating lean management with digitalization. By connecting the most advanced digitalization, intelligent technologies, and management systems, we aim to provide HCD with an "Action Plan to Navigate Cycles" across four dimensions: philosophy, execution methods, measurement standards, and tool kits. This system possesses dual attributes of both culture and management tool. Its core objective is to genuinely drive repeatable growth in customer value through a systematic mechanism and a quantitative indicator-based operational system, focusing on the five key dimensions of efficiency, quality, delivery, cost, and innovation. The main components include:

(I) The HBS Strategic Framework: Three Key Elements of the Implementation Path:

Selecting professional talents to formulate strategic plans.

Establishing sustainable, standardized processes.

Building replicable models of operational excellence.

(II) Grounded in Core Values: Placing customer demands at the center of operations and management, and ensuring products and businesses continuously create value within a framework of stability and continuity by setting clear target systems and measurement mechanisms.

The fundamental goal of HBS is to establish a closed-loop management system that integrates strategic focus, process optimization, and cultural permeation. Its core value lies in transforming the company's vision and strategy into an executable, verifiable tool and methodology for continuous management improvement.

(III) Adhering to the Dual-Engine Development Path of Endogenous Growth and External Expansion: Furthermore, integrating the system of "Technology + Management + Culture" will evolve lean management from a mere "tool" into a corporate "gene." In today's era of uncertainty, relying on strategic resolve, adherence to fundamental principles, and cultural resilience will enable HCD to forge ahead through the waves.

07 The Future HCD: Anchored in Favorable Markets, Evolving into a Superior Enterprise

HCD's pursuit is to become a company possessing both cost leadership and technological leadership advantages.

Guided by the operational philosophy of "an enduring HCD with an evolving business portfolio," we will upgrade our business model by weeding out the weak and retaining the strong, with optimizing key financial indicators as our core objective. We will refine and steadfastly adhere to the dual-engine development path of organic growth and external expansion: implementing a "dual-track" collaborative development mechanism that combines the Group's platform layer with its operating subsidiaries. Building upon the organic growth path, we will conduct deep cultivation within various market segments of related industries. Firstly, we will achieve "capability grafting and business upgrading" through strategic, bolt-on acquisitions, focusing on complementing strengths rather than mere scale accumulation. Secondly, within the external M&A path, we will identify promising markets and acquire companies with technological potential or market prospects within the industry. This will facilitate "industrial transformation and upgrading," gradually developing HCD into a robust enterprise that achieves the dual goal of cost and technology leadership.

Finally, we believe that in 2026, under the guidance of the new operational strategy, every member of HCD will join hands to drive the sustained development of all business segments. By upholding our gene of innovation and pragmatism, tapping into greater inner drive, and proactively mastering the "momentum" of our own destiny, we will usher in a starry sky of our own making. We are firmly convinced that true strength often requires traversing territories beyond one's own to reach the summit. May a brilliance as vast as the starry heavens illuminate HCD's future!

May 2026 become a milestone for HCD’s leapfrog development!

Thank you, everyone!