Backed by the Aerospace Science and Industry Group to concentrate on empowering the main interconnection and drive control business, the grouping and cross-regional layout of the division of labor are clear

In the field of high-end components for aerospace defense, the company ranked 14th in 2021, China's top 100 electronic components enterprises reached a record high; the company focused on the core business of connectors and micromotors and continuously optimized the internal employee structure. Production personnel have continued to decline since 2017, but per capita revenue has continued to increase since 2015; the company has now established a group, cross-regional, and industrialized development pattern of 12 departments in three regions, one hospital, and the division of labor clearly consolidates connection+control business segments to determine growth.

Connecting the world: Connectors and optical devices are developing at a rapid pace, with global market space estimated at US$149 billion by 2027

Civil-military connectors are developing in the direction of high voltage and high speed, and supporting cable components are developing in the direction of lightweighting, high voltage, and modularity under the premise of ensuring safety. According to Bishop & Associates estimates, the global connector market space is expected to reach 111.5 billion US dollars in 2027; passive optical devices evolve towards low loss, high interchangeability, and integration trends, and active optical devices iterate at high speed. According to estimates by MARKETS AND MARKETS, the global optical device market space is expected to reach 37.5 billion US dollars in 2027.

Driving the future: The control performance of micromotors and relays continues to improve, and the global market space is expected to be 73.5 billion US dollars in 2027

Trends such as miniaturization, integration, and intelligence of micromotors have been established, and the product structure continues to be upgraded. According to PRECEENCERESEARCH statistics, the global micromotor market space is expected to reach about 61.27 billion US dollars by 2027; the environmental resistance of defense relays continues to improve, and new energy vehicles are equipped with 800V architectures to achieve super-fast charging and traction of HVDC into the mainstream route. According to statistical estimates by MARKETS AND MARKETS, the global relay market will reach 12.2 billion US dollars in 2027.

The autonomy of the science reform demonstration units of the State Assets Administration Commission has increased, equity incentives have been implemented, and production capacity has broken through bottlenecks, pointing to nonlinear profit expansion

The company continues to deepen reforms. The current management is nurtured internally by the company, and the ability to make independent business decisions and operating vitality are expected to further improve; the implementation of the company's equity incentives will fully mobilize the work enthusiasm of middle and senior management and core technical personnel, and the continuous improvement of operating vitality will help the company achieve high-quality development; after its initial public offering in 2021, the company raised a large amount again. The total amount of capital raised through non-public offering was over 1.4 billion yuan to expand the production capacity of connectors, Vita Motors, etc., to seize the release of downstream sentiment.

Profit forecasting and valuation

First-time coverage gives a buying rating. The company is a leading enterprise in the field of high-end components for aerospace defense in China. Increased autonomy in operation and management, combined fund-raising and expansion of production to break through capacity bottlenecks, the certainty of long-term high-quality development has been further enhanced, and the implementation of equity incentives has stimulated the enthusiasm of core management and technicians. It is estimated that the company's net profit returned to the mother in 22/23/24 is 5.4/81/1.16 billion, with year-on-year growth rates of 11%/50%/44% respectively. Corresponding PE is 48, 32 and 22 times, respectively. If the mid-14th Five-Year Plan adjustment orders exceed market expectations and the company's fund-raising projects are put into operation early, it will be The company provides additional performance flexibility.

Risk warning

1. In the transformation process of intelligent manufacturing, the degree of adaptation to “small-batch, customized” production demand for military goods fell short of expectations; 2. Affected by the price increase of upstream bulk raw materials, the share of raw material costs rose sharply, making profit quality fall short of expectations; 3. Uncertainty about the specific timing of the issuance of the mid-term plan for the 14th Five-Year Plan and changes in demand in various downstream application areas; 4. Uncertainty in the construction process of the company's fund-raising project and the uncertainty of adjusting plans according to downstream demand in real time.