The company is the leading domestic harmonic speed reducer, and its products break foreign monopolies. The company was founded in 2011 and is a high-tech enterprise specializing in R&D, design, production and sales of precision transmission devices. Its products include harmonic reducers, mechatronic actuators and precision components. The company's harmonic reducer products include various series types such as LCS, LHS, N series and Y series. Among them, Y series products use a new structure and tooth design, and use third-order harmonic technology to replace secondary harmonic technology. They are ideal for use in application scenarios that require extremely high transmission accuracy, strong carrying capacity, good system rigidity, and low output vibration. The company's products are widely used in high-end manufacturing fields such as industrial robots, service robots, CNC machine tools, aerospace, medical equipment, semiconductor production equipment, and new energy equipment. After years of continuous investment in R&D, the company has taken the lead in achieving industrial production and large-scale application of harmonic reducers in China, breaking the monopoly of international brands in the field of domestic robot harmonic reducers.

Harmonic reducers are the core transmission components of robots, and humanoid robots open up a market space of 10 billion dollars. Harmonic reducers are one of the core components of robots. Currently, their application fields are mainly industrial robots. According to data from the Huajing Industrial Research Institute, taking Hammernake as an example, downstream applications of its products accounted for more than 50% of Chinese industrial robots in 2021. According to data from Observation Research Network, the global harmonic industry market size reached 3.04 billion yuan in 2020, and is expected to reach 12.91 billion yuan in 2025. Currently, the domestic market is still dominated by Japanese brands. In 2022, Hamernac's share of the domestic market reached 38%. After Tesla released its humanoid robot, we believe humanoid robots are expected to help the harmonic market open up 10 billion levels of incremental space. According to our estimates, under the neutral assumption that humanoid robots sell 1 million units, the corresponding harmonic reducer market size is 10 billion yuan.

Overall, the demand for harmonic reducers for a single humanoid robot far exceeds that of industrial robots, and humanoid robots are expected to open up 10 billion levels of incremental space for harmonic reducers.

Leading product technology, capacity expansion+overseas layout opens up growth ceilings. Through years of technological innovation and R&D accumulation, the company has invented a new “P-shaped tooth” structure, making the scope of meshing use wider, more in line with the actual situation of harmonic meshing, differentiating it from mainstream toothed technology routes abroad, and greatly improving the output efficiency and carrying torque of harmonic reducers. The quality of the company's reducers is already very close to the standards of international leader Hamelnak, and the product technology gap has clearly narrowed. Some technical indicators have even taken the lead. In addition, the company announced a fixed increase plan to raise 2 billion dollars for the construction of a new generation of intelligent manufacturing projects for precision transmission devices, adding an annual production capacity of 1 million units of next-generation harmonic speed reducers and 200,000 units of mechatronic integrated products. Meanwhile, in April 2023, the company and Sanhua Intelligent Control signed a cooperation agreement to jointly invest in the establishment of a joint venture in Mexico, focusing on R&D, manufacturing and sales of products related to harmonic speed reducers. Capacity expansion+overseas layout will further open up space for the company to grow.

Investment suggestions: We expect the company to achieve revenue of 4.23/5.72/828 million yuan and net profit of 1.37/1.92/265 million yuan in 2023-2025. The corresponding PE is 175.6/125.0/90.4x, covering the first time, and giving it an “increased holding” rating.

Risk warning: the risk of increased industry competition, the risk of falling industry demand, and the risk of fluctuations in raw material prices.