Recommended logic: 1) the company is the first-class supplier of many well-known automobile mainframe factories in China, and we predict that the penetration rate of new energy vehicles will reach 36% in 2023, as the market share of new energy vehicles rises, it will promote the increase of the spring market share of the company's suspension system in the future. 2) the acquisition of Beijing Dayuan and Jiangsu Dayuan help expand world-famous customers, including SAIC General Motors, brilliance BMW, Hyundai Mobis, etc. 3) the proportion of weight loss of new energy vehicles is expected to increase to 20% by 2025 compared with 2015. The ML1900 new material technology mastered by the company can greatly improve the lightweight level of automotive springs and meet the market demand. If a large number of applications are realized in the future, it is expected to further open up the company's growth space.

The company has entered the domestic well-known mainframe factory, and the spring market share of the suspension system is expected to increase. The company is a first-class supplier to some well-known automobile mainframe factories in China, including Geely Automobile, Changan Automobile, Great Wall Motor, BYD Automobile, NIO Inc. Automobile, Li Auto Inc. and so on. In 2022, the output of passenger cars reached 23.814 million, compared with the same period last year + 11.3%. In the first half of 2023, the output reached 11.281 million, and + 8.1% compared with the same period last year. With the increase of the automobile market, the demand for automobile spring system increases. In the first half of 2023, the penetration rate of new energy passenger vehicles reached 31.7%, year-on-year + 7.8pp, month-on-month + 0.5pp. Among them, the company's main customer BYD new energy vehicle sales reached 1.256 million, the ideal sales of 139000, ranking first and fifth in the new energy market respectively. The increase in terminal sales will also increase the market share of suspension spring for the company.

Mergers and acquisitions to expand international customer resources. The customers of Beijing Dayuan and Jiangsu Dayuan, including SAIC GM and brilliance BMW, Hyundai Mobis, Zaifu, Bentler and other well-known customers, have accumulated profound customer resources in automobile mainframe factories and world-renowned auto parts enterprises. Through the acquisition of Beijing Dayuan and Jiangsu Dayuan, the company will open up the international market, enter the supporting system of the global automobile industry, empower the future development of overseas markets, and lay the foundation for becoming a truly global enterprise.

The product is lightweight and closely follows the direction of automobile development. According to the lightweight development goal set in the Roadmap for Energy Saving and New Energy vehicle Technologies, the proportion of weight loss will increase to 20% by 2025 compared with 2015. The performance of ML1900 new material independently developed by the company is in the leading position in the industry. after it is used in spring manufacturing, it will greatly improve the lightweight level of automobile spring. The company will continue to closely follow the development of new automotive technology, understand the latest demand and product upgrading trends, follow the direction of automotive development to improve the company's new technology, and provide a new driving force for the company's future performance growth.

Profit forecast and investment advice: we expect the net profit from 2023 to 2025 to be 0.67,1.29 and 217 million yuan, with a valuation of 23 times in 2024, with a target price of 14.03 yuan, covering the "buy" rating for the first time.

Risk tips: major customer growth is less than expected risk; technology development is less than expected risk; automotive industry demand is less than expected risk.