Carry out business around the downstream applications of IGBT, with homologous technology and management optimization. The company has a rich product line, the four major business sectors are industrial automation, network energy, new energy vehicles and photovoltaic energy storage, the main products are low-voltage frequency converter, modular UPS, new energy vehicle electronic control and photovoltaic, energy storage inverter. From the perspective of industry development logic, many of the company's businesses are carried out around upstream IGBT downstream applications, and IGBT costs account for a high proportion of product raw material costs. The company is proficient in IGBT drive and protection technology, and invests in BYD Semiconductor Co., Ltd. to form a cooperation to form a moat of IGBT technology and supply capacity. In terms of management, the company has experienced senior management changes, financial + engineering and technical capabilities to a higher level, while issuing a three-year development strategy, a strong momentum of development.

The industrial control business has a deep foundation and has benefited from the transformation of the manufacturing industry to achieve steady growth. China is in the early stage of intelligent manufacturing, industrial automation is the main direction of the transformation and upgrading of the manufacturing industry, the scale growth rate is positively related to the industrial added value growth rate of the general equipment manufacturing industry, and closely related to the macro-economic development. The company started from the industrial control frequency converter, has laid a solid foundation for many years, and is in the forefront of the industry in the field of low-voltage frequency converter. At the same time, the company will horizontally expand industrial control products, PLC, servo, etc., to achieve full coverage of industrial control products, and is expected to fully benefit from favorable factors such as national policy support, the transformation and development of manufacturing industry, and the improvement of the localization rate of frequency converters, so as to achieve steady growth in industrial control business performance.

New energy vehicles and optical storage businesses are strong, creating a second growth curve. Due to the requirements of the strategic goal of "double carbon", the new energy industry maintains a high demeanor. The electrification level of commercial vehicles and passenger vehicles continues to rise, and the amount of optical storage and installation has increased significantly. By 2022, the penetration rate of new energy vehicles was 25.6%, an increase of 12.1 pct over the same year last year. In the same year, the global photovoltaic installed capacity reached a record high of 230GW, and the proportion of photovoltaic storage increased. In 2022, the company's new energy vehicle business revenue of 607 million yuan, an increase of 116.64%, a gratifying increase; new energy vehicle electronic control shipments increased rapidly, and expanded from commercial vehicles to passenger vehicles, downstream customers continued to expand; early layout of the field of recharging, in line with the policy support guidance. In terms of optical storage business, the company's new inverter products are frequent and profitable, and are optimistic about the volume and profit of inverter products brought about by the growth of optical storage capacity.

Investment suggestion: the company is a leading provider of industrial automation and energy power solutions in China, focusing on the upstream IGBT business layout, based on the industrial control traditional business basic plate, to expand the field of new energy business, this is "two-wheel drive". With the upgrading and transformation of the manufacturing industry and the rapid development of the digital economy, the industrial control frequency converter and data center UPS are expected to maintain steady growth; with the global clean energy transformation, the electronic control and optical storage inverter of new energy vehicles are expected to increase rapidly. Industrial automation, network energy, new energy vehicles and photovoltaic energy storage have been promoted in an all-round way, which is the "four-core advance". It is estimated that the company's operating income from 2023 to 2025 will be 5.354 billion yuan, 7.098 billion yuan and 9.167 billion yuan respectively, and the net profit will be 454 million yuan, 591 million yuan and 728 million yuan respectively, an increase of 65.3%, 30.1% and 23.2% over the same period last year. The corresponding EPS is 0.57,0.74,0.92 respectively, and the corresponding PE multiple of the current stock price is 18.8,14.5,11.7 respectively. Give a "buy" rating.

Risk tips: raw material shortage and price fluctuation risk; optical storage business market expansion is not as expected; capacity expansion is not as expected; overseas situation risk and exchange risk.