[TECO Earnings Call AI Summary] August 13, 2026

I. TECO (1504-TW) Financial and Operational Details for Q2 2026

1. Q2 and First-Half 2026 Financial Results

Gross margin reached 25.1% (up 1.6% YoY, up 1.6% QoQ), primarily due to improved profitability in the Power & Energy business group; Operating margin reached 10.5% (up 1.0% YoY, up 2.2% QoQ), returning to double digits, mainly benefiting from higher gross margins and significantly reduced expense ratios; Earnings per share (EPS) reached NT$1.12 (up NT$0.43 YoY, up NT$0.61 QoQ).

First-half revenue totaled NT$30.835 billion (up 5.5% YoY); Gross margin / Operating margin: Gross margin at 24.4% (up 0.6% YoY); Operating margin at 9.5% (up 0.4% YoY); EPS: NT$1.63 (up 32% YoY), reflecting improvements in core operations and increased valuation of financial assets.

2. Performance of Four Business Groups (Q2 & First Half)

Electromechanical Systems (approx. 45–46% of revenue): Q2 revenue of NT$7.6 billion (up 12.9% YoY); first-half revenue of NT$13.9 billion (up 6% YoY). Growth driven by markets in Mainland China, Taiwan, North America, and Europe.

Power & Energy (approx. 25–26% of revenue): Q2 revenue of NT$4.3 billion (up 11.1% YoY); first-half revenue of NT$7.8 billion (up 20% YoY). Key growth drivers include data center (Data Center) projects and offshore wind engineering.

Air Conditioning Technology: Q2 revenue up 10.6% YoY; first-half revenue down 11.6% YoY (but focused on commercial air conditioning, achieving double-digit growth in B2B segment).

Energy Machinery Systems / Automation: Q2 revenue of NT$9 billion (up 21% YoY); first-half revenue of NT$1.7 billion (up 15% YoY), primarily due to increased contributions from automation products.

Note: Electromechanical Systems and Power & Energy together account for over 70% of total company revenue.

3. Three Major Market Trends

U.S. Market: Continued investment by CSP operators is driving demand for power-related equipment. Demand for large motors has surged due to increased needs from natural gas pipelines, infrastructure providers, and data centers. Order intake from January to July increased nearly 30% YoY. Actively expanding into transformers, switchgear, and other power equipment, while building new global factories to secure orders.

Taiwan Market: MOEA's high-power-user diagnosis and energy-saving initiatives are creating opportunities in chiller and motor replacement, as well as demand for AI-powered smart energy management platforms. Solar power generation and energy storage installations from January to July have outperformed last year.

Southeast Asia Market: Data center (Data Center) markets in Southeast Asia—especially Malaysia and Thailand—are growing steadily, driving demand for M&E (mechanical and electrical) engineering and customized solutions.

4. Four Strategic Priorities and Future Plans

Green Energy and Energy Storage: Pursuing Offshore Wind Farm II and Taipower Shen'ao Power Plant projects; Australia solar-storage project expected to complete installation and testing in Q4 and begin contributing revenue; domestically produced PCS units now in mass production and shipment; established 30 MW of green power generation capacity.

Electrification and Electric Vehicles (EV/Drones): Launching transformer factory construction in Indonesia; targeting inclusion in U.S. transformer supplier lists; collaborating with Indian clients to develop new e-axles for commercial vehicles and securing mining truck power system orders; completed development of heavy-lift drone systems, with units provided to U.S. clients for testing.

Energy Efficiency and Product Line Expansion: Actively advancing construction of Phase V HVAC plant to capture opportunities in large chillers.

Key Regions and Data Centers: Established a president-directly managed subsidiary to pursue petrochemical and new environmental business opportunities. Simultaneously expanding into Taiwan, Japan, and Southeast Asian data center markets; MDC (Modular Data Center) POC expected to be completed in Q4.

[Full Q&A from TECO Earnings Call]

Q1: How much business opportunity does Taiwan’s government policy mandating energy audits for users above 800kW create?

Answer: The threshold expands from 490 major users to approximately 5,000 users (including malls and SMEs), and is now mandatory. TECO has ESCO experience and can collaborate with Dongxun to assist customers with carbon auditing, reporting, diagnostics, and equipment optimization. This enables us to expand opportunities in replacing chillers, air compressors, pumps, and other energy-efficient equipment, replicating past success with large users across a broader base.

Q2: What is the transformation status and outlook for the Air Conditioning business group and commercial air conditioning (B2B)?

Answer: Overall air conditioning decline in the first half stemmed mainly from the residential (B2C) market, but high-margin commercial large-scale air conditioning (B2B) achieved double-digit revenue growth (over 25%). TECO focuses on large-scale energy-efficient air conditioning for electronics plants (achieving 30–40% energy savings), offering multi-unit chain control and central control systems. Strong demand for high-tonnage equipment (up to 1,600 tons) is improving product mix and significantly boosting gross margins. Revenue and profitability are expected to continue improving.

Q3: What are the main drivers behind the nearly 30% YoY increase in large motor orders in the U.S. from January to July?

Answer: Large air conditioning customers of Tecco-Westinghouse in the U.S. are repurposing equipment for data centers, causing sudden and substantial demand for medium- and high-voltage large motors, with customers placing early orders to lock in delivery schedules. Additionally, high oil prices have prompted oil companies to restart drilling, leading to an explosive increase in demand for 800–1,000 HP HPOP motors.

Q4: What are the latest developments and supply-demand conditions in green power and power sales?

Answer: We have signed our first long-term green power resale contract (with a large stable buyer), and a second contract with a major Taiwanese supply chain manufacturer is about to be finalized. Currently, the green power market faces supply shortages and rising prices. TECO will accelerate support for Taiwanese enterprises in installing solar and storage systems and facilitating power resale.

Q5: What is the order and shipment timeline for the new Malaysia factory (Busway)?

Answer: Received first order at end of July, with shipments expected to begin late September to October. The factory features high automation and laser control, with coating and process lines exceeding industry standards. It offers modular products widely applicable to data centers and Southeast Asian factory construction demands.

Q6: What is the verification progress of the MDC (Modular Data Center) POC?

Answer: Progress is going smoothly. Design of the first 2.7MW MDC POC is complete, located in Malaysia, with construction expected to finish between late September and October. This will be a significant milestone for TECO in the data center domain.

Q7: What are the overall engineering advantages in Malaysia and Thailand data center projects?

Answer: Cloud service providers (CSPs) prioritize guaranteed on-time delivery and high quality. TECO earned customer trust through strong execution by its Malaysia team, enabling expansion into Thailand and other Southeast Asian countries alongside client growth.

Q8: What is the outlook for overall operations and gross margins across business groups in the second half?

Answer: With high-margin products such as commercial air conditioning (B2B), U.S. large motors, Southeast Asian data center busways, and electrification modules shipping sequentially, combined with effective cost controls, overall gross margin in the second half is expected to remain at or above first-half levels and show YoY improvement.