The company released its 2022 annual report. In 2022, the company achieved revenue of 9.0.2 billion yuan/YoY +73.4%, net profit of 490 million yuan/YoY +56.5%, deducting non-net profit of 4.7 billion yuan/YoY +63.2%. The performance was in line with expectations. The company's on-hand orders are full, laying a solid foundation for the company's future performance growth. We maintained the company's 2023/24 net profit forecast of 90/1.39 billion yuan, adding to the 2025 net profit forecast of 1.77 billion yuan.

We maintain a PE valuation of 17 times the company's net profit to the parent in 2023, corresponding to the target price of 23 yuan, and maintain the “buy” rating.

The company's 2022 performance was in line with expectations, and order delivery continued to deliver results. The company released its 2022 annual report. In 2022, the company achieved revenue of 9.0.2 billion yuan/YoY +73.4%, net profit of 490 million yuan/YoY +56.5%, after deducting non-net profit of 4.7 billion yuan/YoY +63.2%. The main reason for the increase in revenue was the continued growth in equipment demand in the new energy industry, the company's orders soared in 2021, and the company delivered performance in 2022. The company's gross profit margin in 2022 was 20.3% /YoY -1.6%. The main reason for the decline in gross margin was that the company's products were mainly front-end equipment with low gross margin. As mid-range lithium battery devices with higher gross margins continue to be released, the company's gross margin level is expected to continue to improve in the future.

The 2022 corporate four rate is 10.2% /YOY-2.4pcts. In 2022, the company's four fee rates were 10.2% /YOY-2.4pcts. Among them, the sales, management, R&D, and financial expenses rates were 2.2% /-1.4pcts, 2.7% /-0.7pct, 5.4% /-1.2pcts, and -0.1% /+0.9pct, respectively. The main reason for the decline in sales/management/R&D expense ratios is the scale effect of increased revenue. In recent years, the company has continuously increased its R&D investment, and the absolute amount of R&D investment in 2022 increased by 41.1% year on year. During the reporting period, the company added a total of 324 invention patents, utility model patents, software copyrights, etc., and successfully developed innovative products such as 1500 wide roller splitters, 24 ppm high-speed large cylindrical laser winding machines, short blade battery assembly lines, and composite fluid collection coating and roller pressing equipment to meet the needs of semi-solid state batteries.

The company's overseas orders are full, accelerating its global expansion. In recent years, the company has continued to make breakthroughs in overseas markets. In 2022, the company received 20 Gwh of key lithium battery equipment orders from Volkswagen and some advance equipment orders from ACC13GWH. In 2022, the company's overseas orders increased more than 100% year-on-year. Among them, overseas orders accounted for more than 10% of the company's overall orders for the first time. With excellent product performance and high-quality delivery capabilities, the company's products have been exported to many countries such as the United States, Germany, South Korea, France, etc., and its overseas market share and brand advantage are constantly improving.

Risk factors: 1. The investment and expansion progress of the domestic and foreign power battery industry is lower than expected; 2. The risk of gross margin falling due to rising prices of upstream raw materials; 3. The risk that gross margin will decline due to increased competition brought about by technological progress from other lithium battery equipment manufacturers; 4. The company's e-cigarette business expansion and progress fell short of expectations; 5. Management risks due to company size expansion, etc.

Investment advice: The company is an excellent supplier of lithium battery equipment, and full on-hand orders lay a solid foundation for the company's future performance growth. We maintained the company's 2023/24 net profit forecast of 90/1.39 billion yuan, adding to the 2025 net profit forecast of 1.77 billion yuan. Referring to comparable companies' 2023 Wind unanimous expectations (Xianwei Smart 16.3x, Li Yuanheng 14.0x, Hymexing 13.1x, Hangke Technology 19.1x) corresponding to the average valuation level of 16xPE, considering that the company followed the lamination trend of increasing the share of revenue from Zhongdao equipment, energy storage and overseas revenue growth, we maintained the PE valuation of the company's 2023 net profit of 17 times the company's net profit of 23 yuan, corresponding to the target price of 23 yuan, maintaining the “buy” rating.