Core point of view: The company aims at leading silicon steel private enterprises. While new projects expand production dramatically, the proportion of high-magnetic and high-grade silicon steel is expected to continue to increase, fully benefiting from the price elasticity brought about by the pattern of oversupply of silicon steel. At the same time, the company's production and sales scale of power transmission, distribution and control equipment is expected to expand rapidly, and profitability is expected to increase; demand for silicon steel and power transmission and distribution equipment is expected to benefit significantly from the restart of power construction and the accelerated development of new energy sources such as wind and light, and profits are expected to continue rising.

The silicon steel business is high-end, and the power transmission and distribution business is progressing steadily. The pattern of the silicon steel industry is clear. The company's production and sales scale is at the forefront of the industry. The current advantage is mainly reflected in: (1) the company and Valin Steel have carried out technical research and fully mastered the high-magnetic silicon steel production process. The new project rapidly expanded production of high-magnetic products while ensuring the supply of raw materials while fully benefiting from the price advantages and future flexibility of high-end products; (2) The company's production capacity is rapidly expanding, and the production capacity will increase by 80% in the next two years, with production capacity increasing by 80% in the next two years, of which the proportion of high-magnetic-sensitive silicon steel is expected to increase further; (3) Appliances, box-type substations and complete sets of electrical equipment Steadily expand production, relying on traditional business advantages to further raise the level of profitability.

The shift of gears in thermal power and wind power construction has accelerated, and demand for silicon steel has entered a stage of high growth. (1) Under the guidance of “coal-based” guidance, the number of new coal power installations is expected to increase significantly in the future. Policies such as approving 80 GW each year in 2022-2023 will push the thermal power industry into a boom; in terms of wind power, 2023-2025, the average annual installed capacity of wind power in the country was about 60 GW to 70 GW, entering a high boom phase; it is expected that in 2023-2025, China's orientated silicon steel will transition from a slight surplus to a phased shortage; (2) the energy efficiency requirements and upgrades of high-grade silicon steel with high magnetism and high-grade silicon steel will be upgraded in the long-term energy efficiency requirements and upgrades Driven by advantages, demand is promising Accelerate improvement.

Investment advice. The company's silicon steel business continues to expand, high-end product iteration has accelerated, the transmission and distribution business has steadily increased production, the restart of downstream thermal power and the rise in new wind energy continue to drive demand for high-end silicon steel and transformers. The expansion trend of the entire industry chain is expected to support higher valuations. We expect the company to achieve net profit of 280 million yuan, 3.7 billion yuan, and 490 million yuan respectively from 2022 to 2024, with corresponding PE being 25.2, 19.3, and 14.4 times. First coverage, giving a “buy” rating.

Risk warning: Prices of upstream raw materials fluctuate greatly, downstream electricity demand falls short of expectations, industry space estimates may be biased, and there is uncertainty about new production lines and business development.