Incident: The company issued an announcement on the public offering of convertible bonds on March 15. The initial conversion price of the convertible bonds issued this time was 10.40 yuan/share, and the total capital raised did not exceed 570 million yuan for the annual production of 5 million sets of automotive electronic magnesium-aluminum structural parts projects and supplementary working capital.

The capital raised to promote the automotive electronics business, and a “one in two wings” pattern was formed: the company raised a total of 570 million yuan in the current public offering of convertible bonds. Among them, the project, which produces 5 million sets of magnesium-aluminum structural components for automotive electronics, has a total investment of 412 million yuan, with a proposed investment of 400 million yuan; the construction period is 3 years, using a method of construction and production at the same time, production capacity will be gradually released starting in the 2nd year, and full production will be reached in the 4th year. After the successful implementation of this fund-raising project, automotive electronic structural components will develop collaboratively with laptop structural components and communication module structural components to form a new “integrated two-wing” industrial pattern, further optimize the company's business structure, expand the automotive electronic structural parts business while steadily developing the main consumer electronics structural parts business, introduce high-value-added products, optimize the product structure, consolidate the company's leading position in the industry, and enhance the company's profitability.

Introduce high-end Japanese equipment to strengthen the advantages of semi-solid state injection molding technology: The company has been deeply involved in the field of structural components for many years, has rich experience in magnesium-aluminum processes, and has proficiently mastered and applied many years and a half of production technologies and production processes such as solid state injection molding, CNC, coating, printing and assembly, and automated deformation detection. The company took the lead in introducing a 1,300-ton injection molding machine newly developed in Japan, which can be used to manufacture automotive triple screen (instrument panel+central control screen+passenger screen) products. Technically, it has a first-mover advantage, which has formed a certain industry barrier. Compared with traditional magnesium-aluminum technology, “semi-solid state injection molding” technology has advantages such as higher safety, improved yield, shorter work cycles, and reduced labor costs. The company's adoption of “semi-solid state injection molding” technology helps improve production efficiency, improve product quality, and has achieved remarkable results in cost reduction and efficiency.

New products are expanding strongly, and magnesium-aluminum structural parts have opened up profit space: In recent years, the application range of lightweight requirements in automobiles has gradually increased, gradually becoming an important trend in automotive electronics, driving the development of automotive electronic components to converge in the direction of lightweighting. Magnesium-aluminum structural parts have low density but high strength. They are lightweight materials for car bodies with excellent performance, in line with the lightweight trend of the automobile industry. According to the company's estimates, in 2023 and 2025, global automobile production will reach 85.2013 million units and 93.399 million units, respectively, and the global automotive display structural module market will reach 20,05215 million units and 252,7484 million units respectively. On the one hand, the gradual increase in production of new energy vehicles has led to a rise in demand for magnesium-aluminum alloys. On the other hand, the superior properties of magnesium-aluminum alloys can meet the lightweight and functional requirements of automobiles. As the boom in automotive electronics continues to rise in the future, it is expected that the company will fully benefit from the increasing demand for magnesium-aluminum structural components in new energy vehicles in the future.

Giving a “buy” rating: The company has been deeply involved in precision structural parts for many years and has integrated service capabilities from precision mold design and manufacturing to precision structural component module production for consumer electronics products. It is one of the leading enterprises in the industry. The company changed from laptop structural parts to automotive electronic structural parts. It has the latest technology for magnesium and aluminum structural parts. It can obtain orders from new car builders with technical advantages and scale advantages, and quickly enter the new energy vehicle market. We are optimistic that magnesium-aluminum alloys will play a unique advantage in automotive electronics and become a new growth point for the company's future performance. We estimate that the company's net profit from 2022 to 2024 will be 156 million yuan, 200 million yuan, and 319 million yuan, EPS will be 0.35 yuan, 0.46 yuan, and 0.73 yuan respectively, and the corresponding PE will be 26X, 20X, and 13X respectively.

Risk warning: New business development falls short of expectations, downstream demand falls short of expectations, production expansion progress falls short of expectations, and exchange rate fluctuations affect.