Shrek: cans / lids production equipment leader, layout battery shell business. The company is traditionally mainly engaged in easy-to-pull cans / cover equipment, and its revenue accounted for more than 80% from 2018 to 2022. The cumulative domestic market share of the company's easy-to-pull cover high-speed production equipment is more than 70%, and the cumulative market share in Europe and the United States is close to 10%. In 2018, with the help of the experience in the production of power battery structures with cans, square battery cases, small cylindrical steel shells and cylindrical aluminum shells have been supplied in batches. 2023H1 battery shell business accounts for 40% of the small batch trial production of large cylindrical steel shells.

The can equipment benefits from the improvement of beer canning rate & the technological innovation of two-piece cans, slick firmly occupies a leading position: compared with the traditional three-piece cans, the two-piece cans have the advantages of simple process, high production efficiency and less material consumption. under the traditional path, the production efficiency of cans is about 1200 cans per minute, and the production efficiency of two-piece cans is 2400 cans per minute. Slick can reach a maximum of more than 3000 cans per minute. In recent years, the domestic demand for cans has been affected by downstream healthy consumption habits, intensified competition in the beverage packaging market, and rising international prices of non-ferrous metals, and the growth has slowed down. we expect that the new and updated market for two-piece can equipment in China will total nearly 1 billion yuan by 2025, and the CAGR will be 10% in 2022-2025.

Cross-border application of DWI technology, battery shell business opens room for growth: (1) DWI is the best fit for cylindrical batteries, which depends on the industrialization progress of 4680 large cylindrical batteries: due to the similar product shape, the DWI process of easy-to-pull cans / lids is naturally suitable for cylindrical battery shells, which can achieve higher production efficiency and higher material utilization, and small cylindrical battery companies have achieved batch supply. However, due to the low degree of standardization of the small cylindrical battery shell and the differences in the same series of 18max 21 battery shells from different battery factories, the order quantity of the company's DWI single production line is too small, and the scale effect is not prominent. we think that the 4680 cylindrical battery has a higher degree of standardization and a larger single production line, and the company's large cylindrical steel shell is in small batch trial production. 4680 cylindrical batteries, such as Tesla, Inc., Yiwei, etc., will be released in the future. The advantages of the company's DWI process can be highlighted. (2) Square shell is the mainstream route, DWI process needs to be adjusted in order to adapt: square is the current mainstream route of battery shell, DWI process needs to be adjusted more for square shell, the company has successfully completed the research and development of square shell production line based on DWI technology, and is carrying out on-line debugging work. In the future, Yibin, Fenyi and Changzhou square shell production base will gradually fall to the ground, and the square field company is expected to seize a certain market share.

Profit forecast and investment rating: we expect Shrek's return net profit from 2023 to 2025 to be 1.8,3.1 and 490 million yuan respectively, and the current stock price corresponds to a dynamic PE of 37, 21 and 14 times, respectively.

The company's traditional cans / lids are growing steadily, and the volume of new energy battery shell business is about to be released, so for the first time, the company has been given an "overweight" rating.

Risk hint: the permeability of new energy vehicles is lower than expected, the discharge of large cylindrical batteries and square shell batteries is not as expected, and the demand for cans / lids has dropped sharply.