Event: on January 31, Prince Xincai issued an announcement: Ningrong Electronics, a wholly-owned subsidiary of Ningbo Xinrong, a subsidiary of the company, and BYD supply chain Company, a wholly-owned subsidiary of BYD, recently signed the General principles for Purchasing productive Materials of Fudi Power.

Comments:

Successfully cut into the BYD supply chain, new energy customers to the next city. The Fudi Power productive Materials Purchasing principles signed between Ningrong Electronics and BYD supply chain Company is the basic terms of the procurement contract signed by both parties, which marks the company's successful entry into the BYD supply chain. The signing of this contract is another breakthrough in the development of new energy customers after the company signed the "General principles for Purchasing parts" with Zero Technology in December 2022. The company will establish a long-term and stable cooperative relationship with BYD, and with the gradual landing of orders, the company's business in the field of new energy vehicles is expected to continue to develop and thicken the company's performance.

Focus on expanding the field of new energy, thin film capacitor expansion to promote. The predecessor of Ningbo Xinrong subsidiary is Ningbo Capacitor General Factory, which was founded in 1969. It introduced Japanese metallized thin film capacitor technology in 1985 and has been deeply cultivated in this field for nearly 40 years. After holding a 60% stake in Ningbo Xinrong by strategic investment, the company retained the core management team and further increased its shareholding to 85.5% in January 2023. Before Ningbo Xinrong was acquired by the company, the products were in a wide range of downstream areas, including military industry, new energy vehicles, photovoltaic wind power generation, power grid, rail transit, medical care, home appliances and other fields, but the production capacity was limited, so the company expanded its production after the acquisition. At present, a new energy vehicle capacitor production line has been officially put into production, and another new energy vehicle capacitor and photovoltaic capacitor production line is expected to be completed in the near future. Ningbo Xinrong's new energy orders are growing rapidly, and production expansion will help it focus on new energy vehicles, photovoltaic wind power and other new energy fields, fully benefiting from the wave of new energy industry.

Power electromagnetic emission industry, open the second growth curve. Through the acquisition of CLP Huarui and Ningbo Xinrong, the company has cut into the electromagnetic emission industry. CLP Huarui mainly engages in warship electronic information system and participates in the development and production of some world's leading cutting-edge weapons. It promises a net profit of not less than 65 million yuan from 2022 to 2023. Ningbo Xinrong ploughs the field of thin film capacitors for nearly 40 years, and military industry is its important downstream. CLP Huarui's high-power semiconductor components, electronic information systems, and Ningbo Xinrong thin film capacitors can be applied to the three core links of electromagnetic emission:

Pulse energy change, control and monitoring and pulse energy storage system. The company plans to build CLP Huarui into a military science and technology industry platform. At present, CLP Huarui has acquired Chengdu Gauss, Wuhan'an and Jie, and cut into the field of military product testing and data link respectively. The development of military business is expected to drive the growth of the company.

Profit forecast, valuation and rating: Prince Xinliao has made positive progress in customer development through the deep layout of military electromagnetic emission and new energy film capacitors through mergers and acquisitions, and is expected to fully benefit from the rise of the electromagnetic emission industry and the wave of new energy industry in the future. We maintain the company's 2022-2024 net profit forecast of 81 million yuan, 181 million yuan, 241 million yuan, and maintain the "buy" rating.

Risk hints: the risk of merger and acquisition integration, the risk of delayed production expansion, and the risk that the growth of electromagnetic emission industry is not as expected.