Key points of investment

Next Wednesday (December 27), a company listed on the Main Board, “Xidian Xinneng” will ask for a quote.

Western Digital Energy (603312): The company's main business is R&D, design, production and sales of electrical connection products. The main products include battery connection systems and composite busbars. In 2020-2022, the company achieved revenue of 250 million yuan/822 million yuan/1,593 million yuan respectively; YOY was 49.34%/228.77%/93.86%, and the three-year compound annual growth rate of operating income was 111.92%; realized net profit to mother of 122 million yuan/80 million yuan/155 million yuan, YOY was -20.90%/259.29%/92.31%, and the compound annual growth rate of net profit for the three years was 76.15%. In the latest reporting period, from January to September 2023, the company achieved operating income of 1,355 billion yuan, an increase of 26.61% over the previous year, and realized net profit of 143 million yuan, an increase of 23.53% over the previous year. According to the company's preliminary forecast, in 2023, the company expects to achieve net profit of 18.18 million yuan to 19.305 million yuan, an increase of 17.67% to 24.95% year-on-year over 2022.

Investment highlight 1. The company has been deeply involved in the field of electrical connectivity for more than ten years, and its core products, composite busbars and battery connection systems, have a high market share in the field of new energy vehicles. The company was founded in 2007 and is one of the earliest domestic manufacturers to enter the field of industrial composite busbars; in 2010, the company successfully entered the core supply chain of CRRC and other companies by participating in the domestic alternative development of hybrid bus products for Harmony EMU trains, and launched an electronically controlled bus for the NEV sector in 2014 to further expand into the NEV field. In 2017, the company creatively combined the composite busbar heat pressing process to launch a heat press solution battery connection system. The product has the advantages of light structure and high degree of integration compared to traditional injection-molded tray solutions, conforms to the industry's trend of lightness and integration, and has been widely recognized by downstream customers. Up to now, the company's composite busbar products have customers from many well-known domestic and foreign manufacturers such as BYD, Farah Electronics, Westinghouse Brake, CRRC, etc. Battery connection system products have also entered the supply chain of the Ningde Era, SAIC Era, etc., and are used in popular models of automakers such as Tesla, NIO, Ideal, Xiaopeng, Great Wall, and Celis; according to the company's prospectus, the market share of the company's electronic control busbar market reached more than 30% in the field of new energy vehicles from January to June 2023, and the market share of battery connection system products was close to 15%, becoming domestic new energy vehicles. Key manufacturers in the field of electrical connections One. 2. The company is deeply bound to major customers such as Ningde Times, and has now become one of the main suppliers of battery connection systems for Ningde Era, a leader in the downstream industry. In 2019, the company participated in the design and product customization development of the large module battery connection scheme for the Ningde Era T project, and achieved large-scale mass production of the large FPC sampling battery connection system in 2020. After that, the company cooperated with Ningde Times on the CCS project for energy storage batteries and reached batch supply with that year; at this point, the company became one of the main suppliers of the Ningde Era electric connection system. At present, the cooperative relationship between the two sides is highly stable and sustainable; on the one hand, since the cooperation in 2020, Ningde Era has been the company's largest customer, and 2023H1's sales revenue from Ningde Era and its subsidiaries accounts for more than 72% of the company's total revenue; secondly, Ningde Times also indirectly holds 0.95% of the company's shares through Changjiang Morning Road, deepening strategic cooperation between the two sides. Looking forward to the future, according to the company's prospectus, in addition to the mass production projects mentioned above, the company is currently participating in the early development of various projects in the Ningde Era, and some of the projects have completed plan design and are about to enter the mass production stage. At the same time, the company plans to further expand the production capacity support base serving customers such as Ningde Times through fund-raising projects such as “Chengdu Battery Connection System Production and Construction” to prepare the layout for mass production of subsequent new products. 3. The company actively develops the next generation FFC sampling battery connection system to further enrich the company's product line. The company independently develops the next generation FFC sampling battery connection system; FFC is a flat cable made by pressing multiple strands of copper wire stranded conductors with insulating materials. Compared with the current mainstream FPC, FFC has the advantages of low cost and high strength, but due to difficult processing problems when using FFC as a signal acquisition line, it is currently not widely used in battery connection systems; it is expected that with the continuous maturity of FFC application technology in battery connection systems, its application share is expected to increase, which is beneficial to companies that lay out FFC-related products in advance.

Comparison of listed companies in the same industry: Changying Precision and Ruikoda were selected as comparable listed companies of Xidian Xinneng; however, in terms of revenue structure, Changying Precision's main products are electronic components, which come from low energy revenue; in terms of product structure, Ruikeda's main products are high-voltage connectors, high-voltage wiring assemblies, etc., and the company's comparability with the above companies is limited. Looking at the comparable companies mentioned above, the average revenue of comparable companies from the fourth quarter of 2022 to the third quarter of 2023 was 7.741 billion yuan, and gross sales margin was 23.11%; in comparison, the company's revenue scale and gross sales margin were not yet equal to the average of comparable companies.

Risk warning: Companies that have already begun the inquiry process may still not be able to go public due to special reasons; the company content is mainly based on prospectus and other public information; there is a risk that the selection of listed companies in the same industry is not accurate; there may be interpretation biases in the selection of content data. The specific risks of listed companies are shown in the text.