Lithium electric equipment and lithium electric material two-wheel drive. The company's main business is lithium equipment, lithium materials, rare earth light-emitting materials and so on. 2019H1 lithium devices and lithium materials account for 46% and 47% of revenue respectively, and gross profit accounts for 64% and 25%, respectively. Both are the company's core business, and the equipment is more prominent. The company's main products of lithium electricity equipment are coating machine, roll press, slitting machine, roll slitting machine and so on. Customers include Ningde era, BYD and so on. Lithium materials include ternary materials and lithium cobalt with a production capacity of about 9000 tons and 2000 tons respectively, which are used in power batteries and consumer batteries respectively. The company's overall revenue fell by about 16% in 2019, and lithium power equipment is expected to grow steadily. Lithium materials are mainly affected by the decline in raw material prices, price decline, and revenue decline. In March 2020, the company's equity incentive program landed, with a performance target of no less than 0.8 billion yuan in net profit in 2023. Equity incentive landing may more effectively encourage management to reduce costs and increase efficiency and release profits.

Lithium power equipment continues to win the bid in the Ningde era of large orders, highlighting the leading position in the industry, long-term optimistic. According to GGII statistics, the output value of lithium power equipment in China in 2018 is about 18.6 billion yuan, the output value of equipment in the front section of lithium electricity is about 6.2 billion yuan, and the proportion of coating machine is about 3.1 billion yuan. Haoneng Technology (the company's subsidiary), Xin Jiatuo and Yakang Precision lead the market in the field of coating machines, with revenues of 640 million yuan, 590 million yuan and 570 million yuan respectively in 2018, with a combined share of more than 50%. The company's lithium power equipment continues to win the bid for more than 100 million yuan in the Ningde era, and won the Ningde era German project in March 2020, which is of great guiding and reference significance to the development of the international market, highlighting the company's leading position in the lithium power equipment industry and long-term value.

Lithium materials capacity release, steady development. China's output of ternary materials in 2019 was about 192000 tons, an increase of 40 percent over the same period last year, with a permeability of 47.6 percent, an increase of 2.7 percent. The total enterprise share of TOP in 2018 is about 30%, and the company's share is about 4%, ranking ninth. At present, the company has a production capacity of about 9000 tons of ternary materials, and is promoting the 5000-ton high-nickel ternary project of the second phase of the Anglo-German base. After the release of production capacity, the company's ternary material production capacity will reach 14000 tons. It is expected that in 2019, the company's lithium materials will be mainly affected by the decline in price and revenue. In the long run, it is expected that the downstream demand for lithium materials will increase, the company's production capacity will be released, and sales will increase steadily, so as to achieve steady development.

Profit forecast and investment advice. The company's lithium equipment and lithium materials two-wheel drive, recognized by mainstream customers, long-term development. It is estimated that the company's EPS in 2019-2021 is 0.18 EPS 0.38 + 0.55 yuan, corresponding to PE is 62-30-20 times, the first time to cover, given a "hold" rating.

Risk tips: (1) the release of capacity is less than expected risk; (2) the risk of policy change of new energy vehicles; (3) the risk of significant fluctuations in cobalt prices.