Latest / WTR Small-Cap Spotlight / ZJK Industrial (ZJK): Precision Parts at the Heart of AI, EVs, and High-Tech Manufacturing

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ZJK Industrial (ZJK): Precision Parts at the Heart of AI, EVs, and High-Tech Manufacturing · WTR Small-Cap Spotlight

• 0:00
  SPEAKER_01: Welcome to the WTR Smallcap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder, and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_01: In today's podcast episode, I have the pleasure of being joined by Neil Dining, Chairman and CEO, ZJK Industrial Nasdaq Ticker Symbol, ZJK.
• 0:21
  SPEAKER_01: Also joining us is my Water Tower Research Equity Research Colleague Eric Goldstein.
• 0:26
  SPEAKER_01: ZJK Industrial is a Shenzhen-based precision metal parts manufacturer specializing in high-performance fasteners and structural components used in some of the world's most demanding applications to include AI infrastructure and liquid cooling systems for high-performance computing, new energy vehicles, aerospace, medical devices, smart wearables, and advanced electronics.
• 0:53
  SPEAKER_01: The company operates five manufacturing facilities, four in China and one in Vietnam, employing approximately 700 people across a fleet of 2,100 machines.
• 1:05
  SPEAKER_01: In 2025, the company produced 8.5 billion metal components and generated approximately 56 million in revenue with consistent profitability and a broad portfolio of over 18,000 standardized and customized products.
• 1:20
  SPEAKER_01: This is a company that sits at the intersection of precision manufacturing, AI infrastructure, and the global reshaping of supply chains, a combination that makes for a timely and compelling conversation.
• 1:33
  SPEAKER_01: So let me first start by welcoming Neil and Eric to today's podcast.
• 1:37
  SPEAKER_01: Good morning, gentlemen.
• 1:39
  SPEAKER_01: Morning, Tim.
• 1:40
  SPEAKER_00: Hi everyone, I'm Nee.
• 1:42
  SPEAKER_00: It's my great pleasure to be here today.
• 1:45
  SPEAKER_01: So, Neil, just to get things uh moving here, um, when most investors typically hear the word fasteners in the US anyway, they might think of a commodity business.
• 1:55
  SPEAKER_01: What would you say to someone who has that first impression of ZJK to clear that clear up that misperception?
• 2:04
  SPEAKER_00: Thank you, team.
• 2:05
  SPEAKER_00: To answer your question, ZJK is not only a fastener manufacturer.
• 2:10
  SPEAKER_00: ZJK is actually a metal path solution provider.
• 2:14
  SPEAKER_00: We are technical first enterprise delivering high-value components.
• 2:20
  SPEAKER_00: Whenever there is a requirement for metal structure components, we are the reliable partner to work with.
• 2:28
  SPEAKER_01: Excellent.
• 2:29
  SPEAKER_01: Thanks for clarifying that.
• 2:30
  SPEAKER_01: And with that, I'll turn it over to Eric to ask a few questions.
• 2:33
  SPEAKER_02: Great.
• 2:33
  SPEAKER_02: Thanks, Tim.
• 2:34
  SPEAKER_02: And Neil, thank you for uh joining us today.
• 2:37
  SPEAKER_02: We really uh appreciate your time.
• 2:39
  SPEAKER_02: I guess first question, let's get started with uh your record uh performance in 2025.
• 2:45
  SPEAKER_02: Um, last year you had record fiscal revenues,$56 million, up 50% year over year, uh, with your gross margins expanding to just about 44%.
• 2:58
  SPEAKER_02: So a nice combination of volume growth and mixed improvement driving the numbers.
• 3:04
  SPEAKER_02: Can you walk us through uh what drove that margin expansion and how the shift towards higher precision, higher value products is reshaping ZJK's business?
• 3:17
  SPEAKER_00: Oh, yes, we had a very good performance last year, 56.1 million in revenue and 44% gross margin.
• 3:27
  SPEAKER_00: That proves our new strategy of sales channel expansion and product upgrade is very successful.
• 3:34
  SPEAKER_00: There are three core drivers for better margin.
• 3:38
  SPEAKER_00: First, we developed many new products in 2025.
• 3:42
  SPEAKER_00: Over the past few years, we have been focusing on high precision, high-value paths.
• 3:49
  SPEAKER_00: Especially in recent years, AI infrastructure surge demand.
• 3:54
  SPEAKER_00: We have developed many new products and new technology.
• 3:59
  SPEAKER_00: Rose new products and new technology contribute better profits.
• 4:04
  SPEAKER_00: Second, our production efficiency increased a lot, which have reduced the production cost.
• 4:11
  SPEAKER_00: Our company has implemented many automation in production.
• 4:16
  SPEAKER_00: We have some new patterns and technology.
• 4:20
  SPEAKER_00: We have integrated in-house technology and high-end automated equipment into our production lines.
• 4:28
  SPEAKER_00: This initiative has increased our production efficiency a lot.
• 4:32
  SPEAKER_00: It also lowers our labor cost manufacturing expenses and reduces a lot of the production cost.
• 4:42
  SPEAKER_00: The scale effect and the supply chain optimization has strengthened our cost control capabilities.
• 4:51
  SPEAKER_00: Our VNA factory, manufacturing, and global sales network effectively improved our global supply chain layout, reduced the logistic expense, and mitigated the tariff risks.
• 5:06
  SPEAKER_00: All these proactive strategy initiative has built up a solid foundation for our performance growth.
• 5:15
  SPEAKER_00: Okay.
• 5:15
  SPEAKER_02: Yeah, that's great.
• 5:16
  SPEAKER_02: So let's look at the um AI infrastructure as a strategic growth driver for your business.
• 5:23
  SPEAKER_02: So the AI infrastructure build-out, so if we're looking at servers, liquid cooling systems, uh GPU clusters, is creating enormous demand for precision-engineered structural and thermal components.
• 5:38
  SPEAKER_02: How does ZJK position itself within this supply chain?
• 5:42
  SPEAKER_02: And what specific capabilities give you an advantage in serving one of the more technically demanding end markets today?
• 6:05
  SPEAKER_00: The demand for server and liquid cooling system and GPU is huge.
• 6:11
  SPEAKER_00: We focus on high-end metal components and have a joint design with customers.
• 6:17
  SPEAKER_00: We stay very close to our customers and work closely with them to design the product based on their application requirements.
• 6:27
  SPEAKER_00: For high precision and pass manufacturing, we have full in-house production capability and take a very good control of every production process and conduct comprehensive testing and fully inspection.
• 6:44
  SPEAKER_00: This ensure our product quality and stable performance.
• 6:49
  SPEAKER_00: Rapid customization and quick delivery are also our advantages.
• 6:56
  SPEAKER_00: The AI industry has some features: fast technology upgrade, diverse customer needs.
• 7:04
  SPEAKER_00: Our flexible production lines and RD capability enable us to complete customized product design and mass production schedule.
• 7:15
  SPEAKER_00: Quick response assemble spield is our key advantages.
• 7:20
  SPEAKER_02: Okay, so Neil, if we look at the liquid cooling and thermal management markets specifically, it seems like that has become an area where there's a critical design challenges as AI compute density increases.
• 7:36
  SPEAKER_02: So CJK has been developing quick disconnect and liquid cooled connector components specifically for these high performance computing environments.
• 7:46
  SPEAKER_02: How large do you see this opportunity?
• 7:48
  SPEAKER_02: And how does CJK's manufacturing expertise translate into a differentiated position in the liquid cooling value chain?
• 7:59
  SPEAKER_00: Yeah, we see a very big potential in the market cooling market for high performance computing and AI infrastructure.
• 8:08
  SPEAKER_00: As AI compute density continue to rise, liquid cooling system has become the mainstream solutions.
• 8:17
  SPEAKER_00: We have seen the global market size for the liquid cooling components grow rapidly.
• 8:23
  SPEAKER_00: We have been in metal parts manufacturing over 15 years and have a very strong engineering team.
• 8:32
  SPEAKER_00: We are pretty good on innovative product design and reliability testing.
• 8:39
  SPEAKER_00: We have launched liquid cooling quick connectors with self-sealing technology programs about two years ago and built up our own testing lab.
• 8:50
  SPEAKER_00: The products we produce are easy to install and compatible with various system size, which address customers' concerns of safety and convenience.
• 9:02
  SPEAKER_00: We also have cost advantages through the integrated manufacturing.
• 9:07
  SPEAKER_00: We have integrated the entire production process for liquid cooling components from the raw material manufacturing to final assembly and testing.
• 9:19
  SPEAKER_00: Our in-house production and testing capability has increased the efficiency and will control the quality and save the cost.
• 9:29
  SPEAKER_00: In addition, we are continuously investing in RD and develop the next generation liquid cooling components, including the Mini QD that we are developing now and including uh integrated the CEMO modules.
• 9:48
  SPEAKER_02: Okay, Neil, let's um turn to uh electric vehicles.
• 9:53
  SPEAKER_02: So the opportunity, the global EV market uh remains one of the most significant structural growth drivers uh for precision components uh when we look out over the next decade, even as the pace of adoption you know is varying by by region.
• 10:10
  SPEAKER_02: How is ZJK positioning its portfolio to capture demand from electric vehicles?
• 10:17
  SPEAKER_02: And how does the tolerance and quality bar in automotive compare to your other end markets?
• 10:25
  SPEAKER_00: Yeah, EV is also a big portion of our business.
• 10:30
  SPEAKER_00: We mainly focus on three faster growing segments.
• 10:35
  SPEAKER_00: First, EV battery components, like fasteners, brackets, thermal parts, high precision corrosion resistance guaranteed battery performance.
• 10:49
  SPEAKER_00: Some of our products are already designed in several car EV makers.
• 10:56
  SPEAKER_00: Second, electric drive system components such as uh uh shaft and connectors.
• 11:03
  SPEAKER_00: Our CNC and co-forging technology meet the screen a street tolerance and wear resistance standard.
• 11:13
  SPEAKER_00: Third, the structural parts and connectors for charge station.
• 11:18
  SPEAKER_00: We have IATF 16949 certification and have a dedicated automotive pass production line for many years.
• 11:28
  SPEAKER_00: We are cooperating with global EV clients to increase our market awareness.
• 11:36
  SPEAKER_02: Okay, that's great.
• 11:37
  SPEAKER_02: Um, let's take a look at um the Vietnam strategy.
• 11:41
  SPEAKER_02: So, your Vietnam uh localization strategy, uh, you you recently outlined a multi-year plan for ZJK's Vietnam factory to serve as a key node in your global production network.
• 11:56
  SPEAKER_02: So, what is the strategic logic behind building out a localized Vietnam operation uh at this particular point in time?
• 12:04
  SPEAKER_02: And how does that footprint help your company serve the international and markets more effectively while navigating a shifting global trade environment?
• 12:17
  SPEAKER_00: The strategic logic behind building up our Vena factory is based on the customer needs and our global market development strategy, which are aligned with our global supply chain optimization and long-term development goals.
• 12:35
  SPEAKER_00: First, responding to the global trade environment changes, establishing a local production base in Vietnam allows us to leverage Vietnam-friendly trade terms with the US, Europe, and other regions, reducing tariff risks and trade barriers, and ensuring our supply stable to our customers.
• 13:03
  SPEAKER_00: Second, optimization global production costs and efficiency.
• 13:10
  SPEAKER_00: The labor cost is lower in Vietnam, and we also have several key customers in South China, which can effectively save the logistic cost.
• 13:22
  SPEAKER_00: Our Vietnam factory adheres to green production standards and holds certifications meet the sustainable development requirements of the international customers, diversifying production capacity and reducing the risks.
• 13:41
  SPEAKER_00: Production in notable countries can also avoid the supply chain risks.
• 13:46
  SPEAKER_00: The VNAM factory as a keynote in our global production network, complements our domestic production base, enable us to flexible allocate capacity according to the market demand and reduce the supply chain risks.
• 14:04
  SPEAKER_02: Okay, that's great, Neil.
• 14:06
  SPEAKER_02: So let's look at um uh your US RD and um testing center vision.
• 14:12
  SPEAKER_02: So you announced a joint venture uh recently to develop a US-based precision components facility, uh, which would represent a strategic move uh for you into the North American market.
• 14:25
  SPEAKER_02: So, what is the vision for the facility?
• 14:27
  SPEAKER_02: What end markets do you think it will serve?
• 14:30
  SPEAKER_02: What activities will it focus on?
• 14:32
  SPEAKER_02: And how do you think a US present a US presence will change ZJK's competitive position with North American customers?
• 14:45
  SPEAKER_00: Yeah, we do have a plan to build up an RD center in the Bay Area, and we are doing investigation now for the U.S.
• 14:55
  SPEAKER_00: facility site selections.
• 14:57
  SPEAKER_00: Now we have many big customers in the U.S.
• 15:00
  SPEAKER_00: Once we have the facility in the US, we believe there will be more business opportunities, and it will also benefit our customers as well.
• 15:11
  SPEAKER_00: We can get the first market information, no time difference, quick sample spill, and understand our customer need at the first time, have a joint design, and so on.
• 15:24
  SPEAKER_00: This will definitely help a lot on customer satisfaction.
• 15:28
  SPEAKER_00: It will also help us to increase the market awareness.
• 15:34
  SPEAKER_00: They will know who we are and what we are doing now.
• 15:39
  SPEAKER_00: Regarding the target markets, consumer electronics, AI, semiconductor, robots, EV, and aerospace are all our target markets.
• 15:53
  SPEAKER_00: We have some advantages in US market.
• 16:06
  SPEAKER_00: Closer technical collaboration, and the stronger our brand trust.
• 16:13
  SPEAKER_02: Okay, so let's take a look at um automation now.
• 16:17
  SPEAKER_02: Um, so automation and uh operational scalability uh in the precision manufacturing uh markets is is important because it's inherently capital uh and labor intensive.
• 16:31
  SPEAKER_02: So, how is ZJK approaching automation investments to improve efficiency in your operations and to protect margins as the business continues to grow?
• 16:44
  SPEAKER_00: We implement automation in our target and a gradual way to increase efficiency, lower costs, and gain profit.
• 16:56
  SPEAKER_00: Three factors.
• 16:57
  SPEAKER_00: First, we make investment in core production lines.
• 17:01
  SPEAKER_00: We do automation in labor intensive, high error rate process such as work piece clamping, precision machining and quality inspection.
• 17:15
  SPEAKER_00: Second, ongoing improvements based on the actual products and market requirements.
• 17:22
  SPEAKER_00: We focus on high-end markets.
• 17:24
  SPEAKER_00: We continuously upgrade automation equipment to meet the precision and efficiency requirements.
• 17:37
  SPEAKER_00: We are building an integrated automation system covering raw material procurement, production planning, quality control, and logistic, real-time sharing and process optimization across the entire value chain.
• 17:58
  SPEAKER_02: Okay, thank you, Neil.
• 17:59
  SPEAKER_02: Let's look at um the capital allocation and your your growth plans.
• 18:04
  SPEAKER_02: So you have a strong cash position, uh, you also have an effective shelf registration, along with multiple strategic initiatives that are underway from your Vietnam facility to a future US RD and testing center.
• 18:21
  SPEAKER_02: So, how is management thinking about capital allocation priorities over the next two to three years?
• 18:27
  SPEAKER_02: How do you balance investing for growth against delivering returns for shareholders that are following the ZJK story?
• 18:42
  SPEAKER_00: Cash flow healthy is the bottom line.
• 18:44
  SPEAKER_00: And we will raise the money for several projects in the near future.
• 18:49
  SPEAKER_00: In the next two to three years, we will expand our current production basis, make more investment on RD automation, build up US factories, expand our global sales channel.
• 19:05
  SPEAKER_00: Build up the US RD and testing center.
• 19:09
  SPEAKER_00: This facility will enable us to capture more opportunities in the US.
• 19:14
  SPEAKER_00: Stay close with the global leaders who are definitely good to our long-term growth.
• 19:20
  SPEAKER_00: We will expand our production basis, increase our capacity, and RD capability to meet growing demand from the international customers.
• 19:32
  SPEAKER_00: We will steadily increase any RD investment going forward, focusing on AI infrastructure, robots, liquid cooling technology, position machining, automation, and 6C related components.
• 19:50
  SPEAKER_00: Such efforts will sustain our technology edge and drive product innovative across high growth business segments.
• 19:59
  SPEAKER_00: We will selectively consider strategic partners and complement MA that align with our technology roadmap and market expansion goals.
• 20:12
  SPEAKER_00: To balance growth investment and shareholder returns is our core management focus.
• 20:20
  SPEAKER_00: To that end, all strategic investment will meet I and O criteria.
• 20:27
  SPEAKER_00: Ensuring capital is deployed to projects with high growth potential and stable returns.
• 20:36
  SPEAKER_00: We aim to maintain the balanced framework that retains sufficient capital from growth while considering appropriate mechanism to reward shareholders according to the earning scale.
• 20:51
  SPEAKER_00: We will regularly share information about our capital allocation strategy and investment progress to shareholders, ensuring transparency and building the trust.
• 21:07
  SPEAKER_00: Our goal is to achieve sustainable high-quality growth while delivering consistent value to shareholders over the long term.
• 21:18
  SPEAKER_02: Fantastic.
• 21:19
  SPEAKER_02: Well, Neil, thank you very much for joining us today and walking us through the ZJK story.
• 21:27
  SPEAKER_02: You are building a very impressive business with uh very high revenue growth, serving some very exciting end markets, uh, with very strong margins and uh cash flow at the same time.
• 21:41
  SPEAKER_02: So it's it's very impressive.
• 21:43
  SPEAKER_02: Thanks for being with us today.
• 21:44
  SPEAKER_02: And now back to you, Tim.
• 21:46
  SPEAKER_01: Thank you, Eric.
• 21:47
  SPEAKER_01: And uh likewise, Neil, I appreciate you joining us on the podcast today to discuss ZJK's business model and uh have a great day.
• 21:55
  SPEAKER_00: Thank you.
• 21:56
  SPEAKER_01: Thank you for listening, and don't forget to subscribe, as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 22:12
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 22:18
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.