Ruiling Co., Ltd. (300154.SZ) is a leading enterprise in the domestic welding industry, committed to "becoming a world-class comprehensive welding enterprise group". The company continues to increase technical investment in high-end welding equipment products to enhance the competitiveness of the industry. The company's welding robot business has significant advantages in customer service and technical reserve, or it may become a bright spot in the company's profits. We expect the net profit of the company from 2016 to 2018 to be 87 million yuan, 96 million yuan and 101 million yuan respectively, and the EPS is 0.19,0.22,0.23 yuan respectively. The current share price corresponds to 51x, 46x and 44x respectively. At present, the market capitalization of the company is only 4.6 billion, and the monetary funds on the company's account are close to 1.3 billion. Considering the value of shell resources (conservatively estimated at 3 billion), the margin of safety is relatively sufficient. The company focuses on the layout of high-end welding equipment, welding robot business, market value flexibility, the first time to cover, give [highly recommended] rating.

Ruiling Co., Ltd.-domestic welding industry leader: Ruiling Co., Ltd. (300154.SZ) is a domestic welding industry leader, adhering to the main welding industry, developing high-end welding equipment and welding robot Noumenon on the basis of welding machinery, committed to "becoming a world-class comprehensive welding enterprise group", and continuously enhance the competitiveness of products. The company's main business covers the R & D, production, sales and service of inverter welding and cutting equipment, welding automation products and welding accessories, among which high-end welding equipment and welding robot are the focus of the company's future development. By the end of 2015, the company ranks first in the domestic inverter welding and cutting equipment market share, and has 18 invention patents, strong scientific research force and sufficient technical reserves. Affected by the depressed market demand and fierce competition in the downstream market of the welding industry, the company achieved operating income of 401 million yuan in Q1-Q3 in 2016, down 11.43% from the previous year, and realized a net profit of 73 million yuan belonging to shareholders of listed companies, down 6.99% from the previous year. Overall, the company is financially cautious, accounts receivable and inventory control is low, and the performance is relatively sound, with a net profit of about 100 million in recent years.

The strength in the field of high-end welding equipment continues to increase, profoundly benefiting from the industry shuffle and integration dividend: the company continues to increase technical investment in high-end welding equipment products, and speed up the industrial transformation of existing technological achievements, enhance the competitiveness of the company's products in high-end welding equipment products. At present, the company and CLOOS cooperation project series products, field management Ⅱ generation product series have entered a small batch trial production stage. And set up a US subsidiary and a proposed German subsidiary to further develop the overseas welding market. Compared with foreign countries, the market concentration of Chinese welding industry is relatively low, the scale of manufacturers is generally small, and the technical strength is weak.

With the intensification of competition in the welding market, the enhancement of scale effects of leading enterprises, and the increased customer demand for efficient, energy-saving and environmentally friendly products, it is expected that the production capacity of the welding industry will accelerate clearance and enhance market concentration. As a leading company in the domestic welding equipment industry, the company will profoundly benefit from the industry reshuffle and integration dividend.

The application environment of welding robot is complex, and the company has significant advantages in entering the welding robot business, which is expected to become a bright spot of profit in the future: with the end of China's demographic dividend, rising labor costs and a shortage of welders mastering advanced technology. the demand of welding users for automatic welding equipment will continue to expand, and welding automation and efficient welding will become the future development direction of the welding field. At present, the domestic equipment manufacturing industry is transforming and upgrading from traditional equipment to advanced manufacturing equipment. Driven by the demand of manpower cost and industrial structure upgrading, China's industrial robot industry will develop vigorously. The welding field is one of the most widely used fields of industrial robots, and the requirements for robots in hardware, software, communication, process execution and so on are relatively more complex, while in the application field of welding robots, with long-term practical experience in customer service and professional technical reserve, the advantage of developing welding robot business is more obvious. For this reason, the company has set up a robot department to complete the research and development of key technologies of all-digital power supply for arc welding robots, and is actively seeking cooperation with excellent robot enterprises at home and abroad to accelerate the development of welding robot business. in the future, welding robot business will become a bright spot for the company's profits.

Risk tips: the risk of continuous downturn in the downstream market demand of the welding industry; the risk that the research and development of high-end welding equipment is not as expected; the risk that the market development process of welding robot is blocked.