The supply of diaphragm equipment is scarce, and there is broad scope for domestic development: lithium battery diaphragms are in short supply, and equipment is the main bottleneck limiting the expansion of diaphragm production capacity. Due to the limited production capacity of overseas equipment and the long delivery cycle, it is impossible to keep up with the pace of expansion of diaphragm manufacturers. Combined with the impact of cost reduction factors, diaphragm manufacturers continue to promote the localization of diaphragm equipment.

In recent years, domestic equipment manufacturers have continued to develop equipment and make technological breakthroughs, and China Science and Technology Hualian and others have broken through equipment barriers one after another.

Leading papermaking equipment cut into the diaphragm production line, laying the foundation for the same technology: the company is a leading enterprise in the intelligent household paper equipment industry. The paper industry has a similar process for preparing diaphragms, and technology grafting can be carried out. The company has made breakthroughs in equipment parameters and delivery efficiency. Currently, mainstream diaphragm production lines used domestically, such as Bruckner, Toshiba, etc., have vehicle speeds below 100 m/min, and the company's equipment design speed is idealized to reach 200 m/min. The company has received an order for Guanli's first production line, with a contract amount of 88 million yuan. It is currently being delivered one after another, and the inspection work is expected to be completed in the second quarter.

Demand for papermaking equipment is stable, and traditional businesses continue to grow: as China's economy continues to grow, people's living standards are improving, and consumption upgrading trends are obvious. Coupled with the COVID-19 pandemic driving people's hygiene awareness, people's demand for household paper will continue to grow. In 2021, China's household paper consumption was 10.46 million tons, an increase of 5.02% over the previous year. The revenue of the company's intelligent household paper equipment business has maintained an upward trend over the years. Revenue in 2021 reached 524 million yuan, an increase of 155.31% over the previous year.

Investment advice: The leading position in the paper equipment industry is stable, and the diaphragm equipment project opens up room for future growth.

We expect the company to achieve operating income of 614/11.22/1,422 million yuan in 22-24, net profit of 216.04/514 million yuan, corresponding to EPS of 3.24/6.05/7.71 yuan/share, and corresponding to the closing price of PE on April 18, 2023, 21.81/11.69/9.17 times, respectively. The first coverage gave an “increase in holdings” rating.

Risk warning: risk of downstream market fluctuations; risk of customers being too concentrated; risk of not being able to develop customers.