Main points of investment

Next Wednesday (November 1), there will be an inquiry by Xiaxia Precision, a listed company on the motherboard.

Xiaxia Precision (001306): the company is mainly engaged in the research, production and marketing of small module gears, the main products include power tool gears, automobile gears, reducers and their accessories, smart home gears and security gears, etc. the products are widely used in power tools, fuel vehicles, new energy vehicles, robots, smart homes, medical devices, security and other fields.

From 2020 to 2022, the company achieved operating income of 365 million yuan / 543 million yuan / 518 million yuan, YOY of 20.36%, 48.76% and 4.70%, respectively, with a compound annual growth rate of 19.50%. The net profit of homing was 42 million yuan / 88 million yuan / 88 million yuan, and the YOY was 52.96%, 109.19%, 0.24%, respectively, and the annual compound growth rate of three years' net profit was 47.24%. During the latest reporting period, the company's operating income from January to June 2023 was 260 million yuan, up 9.33% from the same period last year, and the net profit was 42 million yuan, up 32.26% from the same period last year. According to the preliminary forecast, the company is expected to achieve a net profit of 54 million yuan to 69 million yuan from January to September 2023, an increase of 14.34% to 44.5% compared with the same period last year.

Investment highlights: 1. The company subdivides the leader in the field of small module gears, helping to promote the import substitution of the precision gear industry chain. The company is the subdivision leader in the field of small module gears. According to the data of China General Machinery parts Industry Association, the company has a global market share of 1.8% of small module precision cylindrical gears in 2021. Deeply ploughing the small module gear industry for more than 20 years, the company locates the high-end market and insists on adopting high-precision cutting technology. the researched products can improve many shortcomings of ordinary gears, such as high noise, high cost, low reliability, low life and so on. help promote the import substitution of precision gears and related products. In addition, based on the core business, the company has developed high-end gear processing tools that mainly rely on foreign imports, which not only meet its own production, but also achieve sales to companies in the same industry. help the company to quickly respond to the demand for gear production and research while reducing production costs, improving quality and efficiency. 2. Bind well-known customers downstream; the three major businesses go hand in hand, among which the automotive gear business has developed rapidly in recent years. After long-term accumulation, the company has established a long-term and stable relationship with international well-known customers such as Mutian, Bosch and Nippon Electric, and opened up a number of high-potential large customers, such as Chuangke Group, BYD, Schaeffler, ABB, Panasonic and so on. 1) in the field of power tools, the export rate of China's power tools industry has reached more than 80%. A large number of well-known international power tool manufacturers have set up factories in China to increase the procurement of domestic power tools gears and other accessories; by virtue of long-term accumulation, the company has a strong competitive advantage in power tool gear export. 2) in the field of reducers, at present, precision reducers in the robot field mainly rely on imports, and the company's products have the characteristics of high precision, excellent reliability, good consistency and high performance-to-price ratio. in the future, it may benefit from the expansion of the demand of the robot industry and the improvement of the localization rate of middle and high-end robot reducers. 3) the company's automotive gear business has developed rapidly, the contribution of revenue has increased from 21.98% in 2020 to 56.46% in January-June 2023, and the sales share of customers in the automotive industry, such as BYD and Schaeffler, has increased rapidly. From January to June 2023, BYD became the largest customer (15.59%).

Comparison of listed companies in the same industry: taking into account business and product types, Fengli Intelligence, double-ring drive, green harmonics and Zhongdalide are selected as comparable listed companies in Xiaxia; from the above comparable companies, the average income in 2022 is 2.153 billion yuan, and the sales gross profit margin is 28.39%. Comparatively speaking, the company's revenue scale is lower than the industry average, and the gross profit margin is higher than the industry average. However, considering the differences in business structure, we think that the reference may be limited.

Risk hint: companies that have started the inquiry process still have the possibility of not being listed due to special reasons, the company content is mainly based on prospectuses and other public materials, and the selection of listed companies in the same industry is not accurate. Risk, content data interception may have interpretation deviation and so on. The specific risks of listed companies are shown in the text.