Incident: The company disclosed its 2022 annual report on March 31. Total operating revenue for the whole year was 15.035 billion yuan, an increase of 7.01% over the previous year; it achieved net profit of 357 million yuan, an increase of 96.51% over the previous year.

The company's business structure continues to be enriched, and performance management is steadily improving. Looking at operating income by business situation, in 2022, the company's subsidiary New Materials Germany (Bogo) actively promoted transformation and upgrading, mainly driving stability. Automobile revenue totaled 5.572 billion yuan, an increase of 2% over the previous year; wind power achieved a total sales revenue of 5.367 billion yuan, an increase of 7.54% over the previous year; the rail transit department mainly relied on overseas markets to obtain business revenue during the reporting period, with revenue of 1,854 billion yuan, an increase of 9.11% over the previous year, and gross margin of 28.93%; the newly established industrial engineering business unit brought the company's shock absorption and noise reduction outside of rail transit The increase resulted in revenue of 1,649 million yuan, an increase of 11.71% over the previous year; the new materials division established in the same year achieved revenue of 594 million yuan, with a gross margin of 50.29%.

The R&D project promoted changes in the product structure, and the cost control effect was good. The company has strong R&D capabilities and has formed five core technologies of vibration damping technology, noise reduction technology, lightweight technology, insulation technology and flame retardant technology around polymers and composites. The products and system solutions are widely used in new locomotives and trucks on high-speed rail, EMUs and railway trunk lines, urban rail transit and construction machinery industries, wind power industry, automobile industry, etc., and investment in R&D is still increasing. In 2022, the company's R&D expenses totaled 678 million yuan, an increase of 8.95% over the previous year, and the R&D expenditure rate was 4.51%. Overall, expenses during the period were reduced, and there was an increase in management expenses. The sales, management, and finance expense ratios in 2022 were 2.33%, 3.85%, and 0.10% respectively, with year-on-year changes of -0.89pct, 0.13pct, and -0.48pct. Among them, the increase in management expenses was due to an increase in employee remuneration.

Keep up with the pace of global economic development, maintain the stability of existing businesses, and expand the new energy market simultaneously. Under the trend of market environment recovery, the company began work in 2022 with research and engineering application of polymer materials as the core, and gradually expanded to products such as rubber, plastics, and compliant materials to achieve applications in various fields such as rail transit, wind power, automobiles, and high-performance polymer materials. Currently, the company's product scale in the field of rail elastic components ranks first. According to the company's 2023 business strategy, the rail transit market sector should achieve “steady growth” to further strengthen its position in the industry. Sales and new orders in overseas markets increased by more than 30% in 2022. Among them, in newly developed markets such as Western Europe and Eastern Europe in recent years, new order volume increased by more than 300%. In the field of new polymer materials, the company is in the R&D breakthrough stage. In 2022, the company established the New Materials Division, and high-performance polyurethane products, polyurethane composites, and advanced silicone materials have been recognized by customers. Furthermore, aramid series products have achieved breakthroughs in various fields such as rail transit and new energy motors, revenue has increased, and the sales structure has been continuously optimized. In 2023, the company will aim for import substitution, continue to strengthen research and development of high-end products, and achieve new profit growth points.

In line with the trend of larger units in the wind power industry, research and development of large-scale blades will be accelerated. The company keenly grasped the trend of larger blades in the market and increased production capacity. It sold 11.9 GW of wind turbine blades throughout the year, with an average power of 4.56 MW per set. The wind turbine blade type was rapidly iterated from the 16X series to the 18X and 19X series, promoting mold replacement for the large blade type, improving the ability to meet the customer's large blade delivery needs, and winning market opportunities. Company news shows that on March 29, 2023, the company's first set of 111.5 meter offshore wind turbine blades was successfully delivered at the Sheyang plant. Currently, the Sheyang plant production team and power valley plant assistant team that produce this type of blade have become the most efficient blade factory in China.

Investment suggestions: The company's rail transit dampening business keenly seizes market opportunities, achieves a sharp increase in overseas orders, and maintains the stable development of the original business; at the same time, it continues to form high-quality products with strong R&D capabilities in the field of new materials, and the future market space is broad. Currently, the company has sufficient orders in hand and there is plenty of room for development, so for the first time it has covered a “buy” rating. Net profit attributable to the mother in 2023-2025 is estimated to be 444 million yuan, 565 million yuan, and 823 million yuan respectively. EPS is 0.55 yuan, 0.70 yuan, and 1.02 yuan respectively, and the corresponding PE is 19.7 times, 15.5 times, and 10.6 times.

Risk warning: industry competition risk; international operation and management risk; supply chain risk; industrial investment risk; product quality risk.