Driving factors for the growth of the company: benefit from the incremental scene of power battery materials under electrification, the trend of environmental protection of automobile interior, based on the homology of process chain technology to achieve category expansion we summarize the driving factors for the growth of auto parts enterprises in the in-depth report "Auto parts growth path and Investment Research Framework: price and quantity, upgrade and break the situation". Based on this research framework, we believe that the growth logic of the company is based on the homology of polyurethane material process chain technology, and realize the expansion of product categories from shoe cases and bags to high-end application scenarios such as automobile interior decoration and new energy automotive materials. In addition, the company has gradually extended from upstream raw material suppliers to downstream product companies.

Leather polyurethane subdivision of the field of small giants, strong profitability, counter-cyclical expansion to break the growth bottleneck of the company ploughing the polyurethane industry for more than 20 years, the founder of technical background, attach importance to innovative research and development and talent incentives. The polyurethane industry is facing transformation, with low-end overcapacity but high-end capacity shortage. The first phase of the company's IPO investment project was completed in 2020, the production capacity of leather polyurethane increased by 100000 tons to meet the downstream demand, and the sales scale increased. With the completion of short-term production capacity, the increase in fixed costs and the decline in unit gross profit; in the medium to long term, with the increase in capacity utilization and the upgrading of product structure (functional and solvent-free high gross profit leather with polyurethane), unit gross profit is expected to be repaired. volume profit has risen, and performance has accelerated.

From the supply of raw materials to downstream products, the horizontal expansion of the demand for battery safety of new energy vehicle materials is mainly due to: (1) the terminal selling point of electric vehicles has gradually transitioned from battery life to safety; (2) policies and regulations require that "5min safe escape time" be reserved after an accident; and (3) the reduction of structural components in the trend of battery technology further reduces the safety. Under the trend of integration and safety, the types and dosage of new battery materials such as shock absorption and cushioning, flame retardant and thermal insulation, thermal conductivity and thermal insulation are increased. In 2021, based on the homology of process chain technology, the company customized and developed a variety of polyurethane products with different functions for relevant customers in the field of new energy vehicles, and successfully cut into the new energy vehicle track. New energy vehicle materials track value is high (bicycle value of thousands of yuan), strong growth (material parts + new energy vehicles, double permeability improvement), open the secondary growth curve.

Layout of new environment-friendly automotive interior materials, cut into the mainstream customer supply chain consumption upgrading and environmental protection to promote pu leather down instead of PVC leather / fabric, upward instead of leather, become the mainstream fabric of automobile interior decoration. Automotive interior pu leather is usually made of functional, solvent-free polyurethane. It is a high-end application field downstream of leather polyurethane, with high barriers. In recent years, the company has successfully developed solvent-free polyurethane synthesis technology, which has been recognized by the World Federation of Japan, and has become the most important supplier of leather polyurethane products in the automotive interior leather and seat leather supply system. With the expansion of World Union customers, the company's auto interior business is expected to maintain high growth.

Investment suggestion: we expect the net profit of 2021E-2023E to be 1.35,2.95 and 458 million yuan, and the current share price corresponding to PE is 40,18,12 times. With reference to historical valuations and 2 comparable companies, there is much room for improvement in corporate valuations, covering them for the first time and giving them a "buy" rating.