Event: On December 20, 2023, Dechang Co., Ltd. issued an announcement on obtaining targeted notifications for customer projects. Ningbo Dechang Technology Co., Ltd., a wholly-owned subsidiary, recently received Nexteer North America's project target notice for EPS motors.

The addition of fixed points may have a positive impact on future performance, and the development of the automotive zero business in the international market will further accelerate.

According to Nexteer's North American company plan, the life cycle of this new targeted project is 10 years. The life cycle is estimated to have a total sales volume of about 143 million US dollars (about 1,022 million yuan), and mass production is scheduled to gradually begin in May 2025. The targeting of this project reflects the customer's recognition of the company's comprehensive capabilities in design and development, quality control, and production assurance, etc., and enhances the company's competitiveness in the fields of automotive EPS motors and brake motors, and provides support for future revenue and profit growth in the auto parts business. At the same time, the company's first Nexteer EPS motor project for global models was mass-produced in May 2023. We believe that the target of this new project is expected to further accelerate the expansion of the company's auto parts business in overseas markets on this basis.

Investment suggestions: Industry side: Vacuum cleaner market penetration rate is high, replacement demand is huge; national policy supports the promotion of energy-saving and environmentally friendly motors, and the EPS motor market has broad scope for expansion. Company side: As one of the leading vacuum cleaner manufacturers in the industry, the company's capacity expansion continues to consolidate the manufacturing scale advantage; at the same time, the EPS automotive motor business market and customers continue to expand, which is expected to accelerate growth and continue to inject momentum into the company's performance growth. We expect that the net profit of the company from 2023-2025 will be 3.45/3.96/507 million yuan, corresponding to EPS of 0.93/1.06/1.36 yuan, and the current stock price corresponding to PE is 24.59/21.44/16.74 times, maintaining the “recommended” rating.

Risk warning: risk of increased trade friction, risk of high customer concentration, risk of raw material price fluctuations, risk of brain loss, risk of capital raising investment projects, risk of exchange rate fluctuations, etc.