The company has been deeply engaged in the field of air management for 30 years, is the leader of the global air conditioning filter (with a global market share of more than 30%), works closely with Japanese air-conditioning enterprises, and is expected to take advantage of customers to expand overseas Dongfeng to continue to increase global share. In recent years, relying on the rich experience and technology accumulated in the field of home appliances, we have the advantage in the field of new energy vehicle air filter. considering that the company has strong market response ability, stable batch supply capacity, excellent product quality and low product price, we expect the company to fully enjoy the localization dividend of Xineng vehicle parts and open the second growth curve.

Company profile: air-conditioning filter is the global leader, with full coverage of the industrial chain. The company ploughs the field of air management, is the leading enterprise of global air conditioning filter, and realizes the coverage of the whole industry chain in the field of filter materials. The ownership structure of the company is centralized, and the real controllers Ding Hongguang and Ding Meiying hold a total of 48.2% of the shares of the company, which is conducive to the implementation of decision-making and development strategies. Benefiting from the good relationship with Japanese customers, the company has steadily expanded its overseas markets and achieved steady revenue growth, with an operating income of 9.8% CAGR in 2017-2021. Looking to the future, the company's overseas production capacity has landed in an orderly manner, and with the continuous expansion of Japanese customers around the world, the main industry of home appliance air filtration is expected to grow steadily; in addition, considering that the company is actively expanding production in the field of new energy vehicle air conditioning filters through fixed growth projects, combined with capacity expansion planning and current cooperation with head car companies, we expect that the company is expected to achieve advantage extension to open the second growth curve.

Air filter industry: rich application scenarios, benefit from structural upgrading. Air filter is a device that collects dust from gas-solid two-phase flow and purifies gas through the action of porous filter materials. benefiting from the increasing demand for air quality, the scale of the industry has grown steadily in recent years, and the domestic air filter market scale CAGR reached 9.0% in 2016-2021 (China Research and Development data). From the perspective of downstream application fields, the downstream application scenarios of air filters are more extensive: 1) in the field of household appliances, the proportion of domestic air conditioning upgrading has increased, and the demand for "healthy air" has increased significantly in recent years. Promote the continuous upgrading of the air conditioning filtration system (the unit price of the traditional air filter is several yuan, and the average price of the filter plate with antibacterial function is 10-20 yuan or more). There is still increment in overseas markets, and there is potential in Southeast Asia and other emerging markets. According to our calculations combined with Wind, World Bank, Euromonitor, CEIC and other data, if the air conditioning permeability in South Asia / Southeast Asia reaches the average level in China, the steady-state scale may reach 10 million or even 100 million units. In addition, with the steady increase in the permeability of clean electrical appliances, the demand for air filter consumables is also expected to meet rapid expansion. 2) in the automotive field, the property of the consumables of the air filter is obvious. The service life of the automobile filter is generally about one year (Pacific Automotive Network). It needs to be replaced regularly to ensure the air quality in the car. The potential demand is huge. We estimate that when the HEPA permeability is 15% and the replacement rate of the air filter reaches 30%, the market space of the air filter is nearly 10 billion yuan. With the continuous improvement of the permeability of new energy vehicles and the rise of China's new energy vehicle industry, there is a wide space for zero matching of new energy vehicles in China, and the automobile air filter is expected to be replaced by domestic ones.

The company's bright spot: the leading position of home appliance market is stable, and the epitaxial car opens the second curve. After 30 years of ploughing the air filtration industry, the company has made great achievements in the field of home appliances, and the epitaxial automobile air filter is also expected to achieve growth relay: 1) in the field of home appliances, the company has a rich product matrix and an integrated layout of the industrial chain. It can achieve independent research and development and independent production from the core filter material to the filter net and filter, and leads the world in the filtration performance of "low resistance + high efficiency". With excellent product performance and stable scale supply capacity, the company has formed a long-term good cooperation with well-known brands in the industry at home and abroad. We estimate that the market share of the company's global air conditioning filter plate sales will be about 30% in 2021, and it will show a trend of increasing year by year, considering the global expansion of the company's downstream customers and the gradual release of the company's own overseas production capacity, we expect the market share to continue to increase in the future. 2) in the automotive field, the company announced in September 2022 that it planned to invest an additional 310 million yuan in the construction of Zhuji / Zhuhai annual production of 555 million pieces of new energy vehicle air filter R & D industrialization project, considering that the company entered the automobile industry earlier (mostly Tier2 in the early stage) and accumulated rich production experience and customer resources. It is expected that the company will be able to fully enjoy the domestic substitute dividend by virtue of its rapid response, stable batch supply capacity, excellent product quality and lower product prices (compared with foreign manufacturers).

Risk factors: the company's new production capacity is not as expected; the company's new business development is not as expected; the price of raw materials fluctuates sharply; the industry competition intensifies; the company's overseas business expansion is not as expected.

Profit forecast, valuation and rating: the company is the leader in the global air conditioning filter network, deeply ploughing the field of air management. In recent years, relying on the rich experience and technical background accumulated in the field of household appliances, the company has the advantage of extensive layout in the field of new energy vehicle air filter, considering that the company has strong market response ability, stable batch supply capacity, excellent product quality and low product price. We expect the company to fully enjoy the domestic dividend of Xinneng car parts and open the second growth curve. It is estimated that the net profit of the company from 2023 to 2025 is 111 million / 144 million / 184 million yuan respectively.