Focus on commercial electric heating elements and enter the field of electric heating components for new energy vehicles. (1) The company is engaged in the production and sale of electric heating components and components. The main products include electric heating elements for civilian appliances (kitchen appliances, clothing care, bathroom, HVAC), electric heating elements for commercial appliances, electric heating elements for industrial equipment, and electric heating elements for new energy vehicles. (2) Electric heating components for household appliances are the main source of revenue, accounting for more than 85% in 2022, with sales volume reaching 76.43 million units. The main application areas are clothing care and kitchen appliances. (3) In 2021, the company's electric heating element production ranked third in the global share of electric heating element production, accounting for 5.83%. It is a supplier to well-known domestic and foreign electrical appliances companies such as Midea, Samsung, Haier, and Dongli. (4) Benefiting from the rapid growth in sales of new energy vehicles, the company's share of NEV electric heating element revenue has increased year by year, from 0.02% in 2020 to 3.62% in 2022.

The capacity utilization rate remains high, and fund-raising and expansion of production are expected to further increase the company's share. In 2020-2022, the production capacity utilization rate of the company's electric heating element products was high for a long time. Among them, the capacity utilization rate of metal tubular electric heating elements was 118.20%, 113.07% and 86.48%, respectively, and the capacity utilization rate of exposed electric heating elements was 111.30%, 126.69% and 93.19%. In order to expand production capacity, the company plans to go public on the main board, issue no more than 4.01 million shares to raise capital to invest in the electric heating element production line expansion project with an annual output of 40 million pieces, Hangzhou Rewei Auto Parts Co., Ltd.'s annual technology research and development center upgrade project. It is proposed to invest 456 million yuan, 241 million yuan, and 63 million yuan respectively in the above projects.

The penetration rate of thick film heating technology has increased, and the company's profitability is strong. (1) Under the high voltage trend, thick film heating technology will gradually replace PTC, and the heat pump+thick film heating method may become the choice for more and more models. (2) The company has many types of electric heating component products, scattered customers, and bargaining power. ① There are many categories of household appliances for residential appliances; ② In 2022, the company's top five customers accounted for only 32.87% of sales revenue; ③ The company's export ratio is high, with overseas business revenue accounting for 56.01% in 2022. (3) The company's electric heating components are highly customized, and the profit level is high and stable. In 2022, the company's gross sales margin was 29.08%, net sales interest rate was 14.29%, and ROE was 25.62%, all higher than comparable companies in the same industry. It can be seen that the company's profitability is in the upper reaches of the industry.

Profit forecast and valuation suggestions: (1) We forecast the company's revenue for 2023-2025 to be $1,959 billion, $2,287 million, and $2,643 billion respectively, up 16.12%, 16.73%, and 15.59% year-on-year. Net profit for the return mother was 310 million yuan, 403 million yuan, and 485 million yuan respectively, up 28.33%, 29.90%, and 20.55% year-on-year.

(2) We use PE and DCF methods to value the company. Combined with comparable company valuation levels, we gave the company PE (2023) 25-29x. We expect the company's overall fair value range of 6-12 months to be 7.50-8.991 billion yuan. (3) According to the DCF valuation model, with reference to the neutral scenario of sensitivity analysis, we estimate that the company's overall fair value range for 6-12 months is 8.148 billion yuan to 9.163 billion yuan. (4) Comprehensive PE and DCF valuations. We selected the intersection of the relative valuation range and the absolute valuation range as the overall fair value range for the 6-12 month long term, that is, 81.58-8.991 billion yuan. The 6-12 month overall fair value range we forecast corresponds to the 2022 PE of 33.77-37.22X, the corresponding PE in 2022 (net profit after deducting non-recurring profit and loss) is 34.47-37.99X, and the corresponding PE range for 2023 is about 26.31-29.00X. In the past month ending July 7, 2023, the static average price-earnings ratio of the electrical machinery and equipment manufacturing industry (SFC industry code: C38) announced by the China Securities Index was 21.53 times.

Risk warning: (1) Risks related to the company: risk of exchange rate fluctuations; risk of fluctuations in gross margin; risk of future performance fluctuations in the NEV electric heating component business; management risk due to company scale expansion; risk of loss of technical personnel and loss of core technology; risk of loss of technical personnel and loss of core technology; risk of loss of technical personnel and loss of confidentiality of core technology; risk of additional fixed asset depreciation of capital projects and risk of adverse effects on profits; risk of loss of production capacity; risk of loss of profit forecasting; management risk caused by company scale expansion; risk of improper control by the actual controller; risk of inventory price decline; risk of impairment of goodwill; risk of dilution of immediate returns Risk; accounts receivable recovery risk; risk of changes in tax benefits. (2) Industry-related risks: risk of slowing market size growth and increased competition in the consumer electronics industry; risk of cyclical macroeconomic fluctuations; risk of fluctuations in raw material prices; risk of overseas business. (3) Other risks: The valuation range of this bid report corresponds to a higher price-earnings ratio than the China Securities Index for the electrical machinery and equipment manufacturing industry (SFC industry code: C38) in the last month; the risk of price-earnings ratio corresponding to this bid report being higher than the average price-earnings ratio of comparable companies (2023); risk of issuance failure; risk of stock market fluctuation.