The company deeply ploughs vacuum electronic devices and cooperates with downstream well-known head customers to replace the vanguard made in China. The short-term growth comes from the fields of new energy vehicles and fast charging and scenery storage, the contribution of the new production capacity of high-voltage DC contactors and vacuum AC contactors, and the long-term growth comes from the domestic replacement of high-voltage vacuum devices in semiconductor equipment, aerospace and military industry, large scientific engineering and other industries. The company increases research and development, constantly enriches the product range and expands the scope of application, equity incentive talents, we believe that the company has great potential for long-term growth. Based on the assumption that the new production capacity is successfully completed and digested in time, we estimate that the company's EPS in 2023-2025 will be 1.00 pound 1.75 pound 2.44 yuan respectively.

Deep ploughing vacuum electronic devices, domestic replacement vanguard. The company's products are mainly vacuum devices, including vacuum direct / AC contactors, contact point sets, vacuum relays, vacuum switches, vacuum capacitors and active devices. widely used in new energy vehicles and charging posts, semiconductor equipment, aerospace and military, traditional energy, security radiation, scientific research and other fields Directly supporting Ningde Times, Funeng Technology, Huawei, Huichuan Technology, ADTEC Plasma Technology, North Huachuang, medium and Micro Semiconductors and other well-known enterprises, and indirectly supporting SAIC GM, BAIC, Changan, Dongfeng, Jiangling and other automobile manufacturers. The compound growth rate of revenue from 2020 to 2022 is 28.2%. Revenue growth of 23H1 is 3.6%, mainly due to production capacity constraints, and many new products are in the stage of research and development. Looking forward to the future, the company's DC contactors used in new energy vehicles and charging piles, as well as photovoltaic, wind power & energy storage AC contactors are in the stage of rapid growth, with the increase in downstream demand and the company's investment projects reaching production. The business revenue is expected to enter the rapid release period. Many vacuum relays, capacitors and active devices supporting semiconductor equipment, aerospace and military industry, and large scientific projects are supplied in small batches, and follow-up revenue is expected to continue to grow substantially.

Short-term growth comes from new energy vehicles and charging piles, new energy power generation, while long-term growth comes from domestic substitution.

Electronic vacuum devices are characterized by many varieties, strong customization, wide downstream applications, medium and high-end products rely on imports, and develop in the direction of prolonging service life, improving manufacturing yield, miniaturization, lightweight and so on. The future growth of the company comes from: 1) the high-speed growth of new energy vehicles and charging facilities in the future, and the demand for core electronic vacuum devices will also usher in a period of rapid development. 2) the semiconductor, aerospace and military industries need to upgrade vacuum electronic devices with wider adaptation, higher technology content and better reliability, and realize domestic substitution for imported products in stock. 3) High voltage and high overload of photovoltaic wind energy and energy storage put forward higher requirements for domestic devices. there are opportunities for domestic substitution of existing products and domestic substitution of imported products in this field. The company's main competitors are ABB, Panasonic, Ming Electric House, Comet, Hongfa shares, Guoguang Electric and other domestic and foreign leaders, competitors have certain advantages in strength and scale, we think that the opportunity for the company lies in improving quality and reducing cost to achieve domestic substitution, such as ceramic vacuum capacitors break through variable vacuum technology, can shorten the production cycle to meet different customer needs of different models.

IPO, convertible bond issuance to expand capacity, the future market share is expected to continue to increase. IPO and convertible bonds raised 703 million yuan for capacity expansion and R & D center construction. It is estimated that the production capacity of high voltage DC contactors will increase by 9.48 million, corresponding to the expected output value of 970 million yuan; 50,000 new capacitors, 120000 relays, 1000 active devices, 160 million yuan of expected output value; and 1.65 million new AC contactors. Secondly, the company's equity incentive covers the core management, and the assessment target for 2023-2024 is that the revenue is not less than 1.118 billion yuan, and the net profit is not less than 1.05 billion yuan. With the company replenishing production capacity, improving the level of research and development and issuing equity incentives bound to the core management, the company's comprehensive strength continues to improve, and the company is expected to enter a period of rapid development of revenue and return net profit.

Risk factors: the rise in raw material prices leads to a decline in gross profit margin; there is uncertainty in the overseas political environment, which may lead to lower-than-expected overseas market expansion; capacity construction and digestion fall short of expectations; customer expansion falls short of expectations; R & D and technological innovation fall short of expectations; core technology leaks; technology brain drain; legal risks.

Profit forecast, valuation and rating: the company ploughs vacuum electronic devices, cooperates with downstream well-known head customers, and makes a domestic substitute for the vanguard. The short-term growth comes from the fields of new energy vehicles and fast charging and scenery storage, the contribution of the new production capacity of high-voltage DC contactors and vacuum AC contactors, and the long-term growth comes from the domestic replacement of high-voltage vacuum devices in semiconductor equipment, aerospace and military industry, large scientific engineering and other industries. The company increases research and development, constantly enriches the product range and expands the scope of application, equity incentive talents, we believe that the company has great potential for long-term growth. Based on the assumption that the new production capacity is successfully completed and digested in time, we estimate that the company's EPS in 2023-2025 will be 1.00 pound 1.75 pound 2.44 yuan respectively. Considering the completion of new production capacity and the uncertainty of the expansion of semiconductor equipment-aerospace-military and other products, it will have a great impact on the company's future revenue growth, so the target price will not be given for the time being.