Incidents: The company recently released its 2022 annual report and the first quarter report of 2023. In 2022, the company achieved revenue of 4.105 million yuan, an increase of 106.89% over the previous year; the net profit of the mother was 380 million yuan, an increase of 248.45% over the previous year; after deducting non-net profit of 293 million yuan, an increase of 305.31% over the previous year. In Q1 of 2023, the company achieved revenue of 895 million yuan, an increase of 100.45% year on year and a decrease of 48.38%; Guimu's net profit was 32 million yuan, up 184.17% year on year, down 80.25% month on month; after deducting non-net profit of 102 million yuan, up 279.18% year on year, down 79.76% month on month.

The performance in 2022 was impressive, and the Q1 gross margin improved month-on-month: in 2022, the company's orders increased, acceptance projects increased, and performance increased dramatically. Due to the company's implementation of restricted stock incentives in 2022, the increase in share payment fees was 998.648 million yuan, which had a great impact on the net profit returned to the mother in 2022 and the net profit of the non-return mother; after deducting the equity incentive expenses, the company's net profit increased rapidly. The company's comprehensive gross margin in 2022 was 30.50%, up 5.58 pcts year on year; net interest rate was 9.15%, up 3.66 pcts year on year. The company's comprehensive gross margin in Q1 in '23 was 30.83%, down 2.78 pcts year on year, up 5.40 pcts month on month; net interest rate was 3.49%, up 1.12 pcts year on year and down 5.71 pcts month on month. In terms of expenses, the company's sales, management, R&D, and financial expenses rates in Q23 were 6.05%/8.44%/12.77%/0.13%, respectively. The year-on-year changes were -2.31/0.72/0.10/-0.21pcts, respectively.

New orders for power batteries grew rapidly, and the competitive advantage of TopCon equipment was obvious: in 2022, the company achieved power battery business revenue of 3.327 billion yuan, an increase of 199.13% over the previous year; new power battery business orders were signed about 6.8 billion yuan, an increase of 48% over the previous year. Benefiting from the increased capacity expansion of downstream power battery manufacturers, increased demand for power battery production equipment, and the company's new orders and on-hand orders grew steadily. The company signed about 7.7 billion yuan of new orders for the full year of 2022, an increase of about 35% over the previous year; by the end of 2022, the number of in-hand orders was about 8.1 billion yuan, an increase of about 59% over the previous year. During the first quarter of 2023, the company signed about 1.3 billion yuan of new orders, an increase of about 25% over the first quarter of 2022, and the total number of orders in hand was about 8.4 billion yuan. The company launched TopCon single-dose doping equipment in 2022, which is mainly used in the photovoltaic industry's TopCon battery first-pass boron expansion laser direct blending process. The first batch of such equipment was delivered during the year and mass production was achieved before the 2023 Spring Festival. During the first quarter of 2023, the company's orders for this type of equipment exceeded 400 million yuan, and the bid rate of the project company that had already opened tenders exceeded 60%.

The prospects for lithium battery equipment are broad, and overseas business is progressing smoothly: According to the forecast of the Lithium Battery Research Institute of Advanced Industrial Research, global power battery shipments will reach 1,550 GWh in 2025, and are expected to reach 3000 GWh in 2030. In 2022, the company's power battery laser and automation equipment business achieved revenue of 3.328 billion yuan, an increase of 199.13% over the previous year, and gross margin was 32.38%, an increase of 11.75 pcts over the previous year. The company's power battery laser and automation equipment launched a variety of new products, such as coating roller sub-manufacturing solutions, high-speed coiling solutions, and power battery module/pack solutions, extending to the front and back sections of the power battery production line. The company actively laid out overseas strategies and embarked on a new journey in overseas markets. Overseas orders for the whole year increased by about 450 million yuan (tax included) compared to 2021, and received more than 200 million orders from Korea's leading battery customers; the gross margin of overseas business increased from 37.12% to 38.25%. Driven by national policy support and continuous progress in new energy vehicle technology, it is expected that domestic NEV production and sales will continue to grow in 2023. The increase in NEV production and sales will effectively drive demand from power battery manufacturers to expand production, and the company's demand for power battery lasers and automation equipment is expected to continue to rise.

First coverage, giving a “increase in holdings” rating: The company is a comprehensive laser and automation solution provider, mainly engaged in R&D, design, production and sales of laser and automation equipment for power batteries, photovoltaics, new displays, consumer electronics, sheet metal processing, pan-semiconductor and other industries. The company raised funds from its initial public offering for laser and automation equipment expansion projects that were put into use one after another in 2022; at the same time, it is actively planning the construction of a production base in western Chengdu and Jiangmen Phase II, of which Jiangmen Phase II has already been built using its own capital. Benefiting from growing demand for new energy sources and continuous expansion of overseas business, the company is expected to further open up market growth space. The company's net profit for 2023-2025 is estimated to be 735 million yuan 1,003 million yuan and 1,083 million yuan respectively, EPS is 3.64 yuan, 4.97 yuan, and 5.37 yuan respectively, and PE is 12X, 9X, and 8X respectively.

Risk warning: risk of falling inventory prices and declining turnover ratio, risk of gross margin fluctuation, risk of overcapacity of power batteries, risk of exchange rate fluctuations.