Local industrial control connector leader, automobile, new energy accelerated development. The company was founded in 2002 and listed on the gem in 2022. It started with industrial control connectors and laid out the automotive and new energy fields, forming a "one body and two wings" development pattern. The company's products include 15 series, with an active trading number of more than 15,000 Sku, with rich reserves and a platform system, which can fully meet the downstream needs of "small batch, multi-variety and customization". It has covered Huichuan Technology, Delta Electronics, BYD, SAIC Group, Sunshine Power supply, Goodway and other subdivided application leading manufacturers and accelerated the expansion of new customers. The company has developed strongly in recent years. In 2018-2022, the revenue and homing net profit CAGR were 20.29% and 43.34% respectively. The overall steady operation of the company continued. Affected by the macro-economy, the industrial control business slowed down, and the emerging business such as automobile + new energy maintained good growth. Due to the high barriers of the products, the low degree of localization and the high degree of customization, the company's comprehensive gross profit margin remains more than 40%. With the economies of scale reflecting the continuous improvement of profitability, the profitability is leading the industry.

The layout of the pan-industrial high-value market, the connector has a broad space for localization. The strong development of industrial automation has led to the growth of servo motors, PLC and other industrial control equipment, and the demand for connectors continues to rise. According to Bishop&Associates,2010-2021, the global industrial control connector market size CAGR is about 6%. Due to scattered customers and lack of industry unified standards, industrial control connectors are characterized by small batch diversification, which requires high customization ability of manufacturers and forms certain barriers. The company already has related connector products in the field of industrial robots. Imax O series, WD series, WF series and other products are mainly used in global head brand mechanical arms and control cabinets, and are expected to expand to the field of humanoid robots in the future. Automobile electrification and intelligence put forward higher requirements for the number of connectors and the three major performance of electricity, machinery and environment, the quantity and price of drive connectors are rising, and the company is actively laying out the automobile medium-and low-voltage board end and high-speed and high-frequency market. the automotive business is showing a trend of rapid growth. Overseas manufacturers are dominated by long-term technology and customer barriers, the current localization rate of industrial, automotive and new energy connectors is low, and the incremental opportunities brought about by downstream innovation are reshaping the competitive landscape. With the rise of independent brands and seeking supply chain security and cost reduction and efficiency, local connector manufacturers ushered in a good opportunity for development.

Differentiated competition strategy, multiple layout into the harvest period. The company locates middle and high-end gross profit margin products, adopts differential competition strategy, and constantly develops high-value market segments, which has advantages over overseas counterparts in terms of performance-to-price ratio, fast and flexible response services. The company has mastered the core technology of high-performance professional connectors such as small-spacing floating board-to-board connectors, small-spacing high-frequency high-speed board-to-board connectors, modular integrated connectors, and some models have reached or approached the international first-class level. The company has accumulated deep technology in the field of industrial control, introducing new customers such as Zhuhai Panasonic, Shanghai Shanhua and Tianjin Honeywell International Inc to open the international market, and the products are extended to industrial robots, robotic arms and other scenes. The field of automobile and new energy has become a new growth point of performance through the early layout, in which cars mainly provide medium and low voltage signal connectors for "three power" systems and on-board media equipment, and newly develop high-speed and high-frequency connectors. new energy binds sunshine power supply, Goodway and other inverter leading enterprises, the emerging business holds a higher growth rate. IPO raised 1.444 billion yuan for the construction of intelligent manufacturing and R & D center of South China headquarters, which is expected to alleviate the capacity bottleneck, increase the strength of high-end connectors, and provide continuous power for the rapid development of the company.

Investment advice: Weifeng Electronics is the leader of industrial control connectors in China, with smooth expansion of automobiles and new energy, continuous enrichment of products and customers, and high income growth. Under the differentiated competition strategy, the profit level is located in the upper reaches of the industry. Under the trend of high prosperity in downstream applications and domestic replacement of connectors, the company's performance is expected to meet rapid growth. We estimate that the company's net profit in 2023-2025 is 171 million yuan / 232 million yuan / 311 million yuan, EPS is 1.56 yuan / 2.11 yuan / 2.83 yuan, corresponding to PE is 35X/26X/19X, considering that the target has a certain scarcity, the track in which the domestic alternative space is broad and the downstream application boom is high, it will be covered for the first time and given "buy" rating.

Risk hints: the risk of rising prices of major raw materials; the risk of intensified competition in the industry; the risk of technological iteration; the risk of fluctuations in the international macroeconomic and political situation; and the risk that the public information used in the research report may lag behind or not be updated in a timely manner.