Core view: The company is a leader in hybrid (HB) stepper motors, with revenue of 2,960 billion yuan in 2022, net profit of 247 million yuan, HB stepper motor production of about 18 million units, and a global market share of more than 10%, ranking in the top three. It is the only domestic enterprise that has changed the global competitive pattern of HB stepper motors in the last ten years, breaking the monopoly of Japanese companies. We believe ① the main business controls motors: at the bottom of the cycle, driven by downstream emerging markets, the company's rich product range, and the introduction of new production capacity, it will achieve steady growth. ② Humanoid robots: Enjoy the first-mover advantage, with hollow cup motors as the core, horizontal expansion drives, linear motion products, gearboxes, speed reducers, encoders, etc., which are expected to fully benefit from the volume of humanoid robots and open up a new growth curve.

Control motors: HB stepper motors break the monopoly pattern of Japanese companies and contribute more to emerging downstream fields. A stepper motor is a motor that converts an electric pulse signal into a corresponding angular displacement or linear displacement. According to QY Research data, the global stepper motor market in 2022 is $2,079 billion, is expected to be $2,359 billion in 2029, and has a CAGR of 1.82% in 2022-2029. Japanese companies occupy the vast majority of HB stepper motor market share. In 2015, the shares of Japan's Shinano, Nihon Mbea, and Nidec, which ranked in the top three HB stepper motors in the world, reached 28.05%, 27.50%, and 12.38%, respectively, and the company ranked fourth with a 10.18% share. In 2022, the company's HB stepper motor production was about 18 million units, and the scale has entered the top three in the world. The company's product layout is in the fields of downstream mobile robots, factory automation, medical equipment, photovoltaic/lithium battery/semiconductors, smart car electronics, etc., and is expected to benefit from the rapid growth in demand in emerging, high-value-added industries.

Robot: Cut in with a hollow cup motor as the core, in a variety of component layouts. The hollow cup motor is the core component of the robot's dexterous hand joint module. Referring to Tesla Optimus, if each hand requires 6 hollow cup motors, assuming that the sales volume of humanoid robots is 10/50/1 million unit-hours, the hollow cup motor market is expected to reach 12/48/72 billion yuan, compared with the market size elasticity of 23.2%/93.0%/139.5% in 2022, with broad room for growth. The company's hollow cup motor product layout is early. It has obtained relevant patents in 2015, and strengthened the company's product advantages through the acquisition of T Motion. So far, it has accumulated R&D for about 8 years. The first-mover advantage is clear, and the position of suppliers in the industrial chain is relatively certain, so it is expected to be the first to benefit. In addition, various products within the company group can be used in humanoid robots, such as stepper motors, hollow cup motors, drives, linear motion products (including threaded screws and ball screws), gearboxes, speed reducers, encoders, etc., which are expected to provide customers with modular products and increase product value.

Endogenous development+external mergers and acquisitions to build a micromotor platform enterprise. The company is committed to building a micromotor platform enterprise, and the product layout is gradually improving. 1) Endogenous development, enriching the product matrix based on more than 20 years of technical reserves and product line development platforms. With HB stepper motors as the core, the company's product line covers motors, drives, linear motion products, power electronic control, software, relays, etc., and the construction of platform-based enterprises is improving day by day. 2) Outreach mergers and acquisitions, global layout. Through the acquisition of two well-known motor drive control companies, AMP in the US and T Motion in Switzerland, the company has established a leading R&D and manufacturing platform for motor drive control and solutions. In addition, it has also acquired Lin Engineering, Changzhou Traffic Control Electronics, etc., and has successively expanded the fields of drives, high-end stepper motors, hollow cup motors, etc., to enter the high-end market in North America, further open up the European market, and enhance its overall competitiveness.

Growth logic: The main business, the control motor business, is growing steadily, and many products, mainly hollow cup motors, are expected to benefit from the wave of humanoid robot development. 1) HB stepper motor field:

① The industry has continued to decline since the end of 2021 and is close to the bottom; ② The Taicang base has completed capacity relocation, the Vietnam base has invested in mass trial production, and production capacity for HB stepper motors, PM stepper motors, LED control and drive products, and brushless motors is about to be released; ③ Downstream emerging industries are developing rapidly. 2) Robotics field: ① Hollow cup motors lead the country, have mass production capacity, and outstanding first-mover advantages and card position advantages. Compared with the 16mm motor with the biggest price difference compared to Maxon, the price of Mingzhi's product is only about 28% of Maxon's, and the cost performance advantage is remarkable; ② The platform-based construction has been very effective. Various products can be used in humanoid robots, enhancing the company's ability to deliver modular products and strengthening collaboration between products.

Investment suggestions: We expect the company's net profit from 2023-2025 to be 1.57/2.49/360 million yuan respectively, an increase of -36.5%/58.7%/44.3%, and the corresponding PE level is 198/124/85 times, respectively. Considering the steady growth of the company's main business, HB stepper motor business, various products in the humanoid robot field are expected to benefit. The construction of the micromotor platform is improving day by day. It is given a target price of 85 yuan for 12 months, corresponding to PE 144X in 2024, covering the first time, and giving it an “increased holdings-A” rating.

Risk warning: investment in manufacturing is sluggish, robot promotion falls short of expectations, market competition intensifies, product iteration falls short of expectations, impairment of goodwill, and estimation is subjective.