Incident: The company announced on January 9 that Luoyang Guohong Investment Holding Group Co., Ltd. publicly listed and transferred 13% of Luoyang LYC Bearing Co., Ltd.'s shares. The company plans to form a consortium with Henan Aoluofuyu Precision Manufacturing Private Equity Investment Fund partnership to participate in the delisting and transfer of 13% of Luozhu Company's shares. Among them, the company plans to directly transfer 8.5%, and the reserve price investment amount corresponding to the public listing transfer is 231 million yuan.

Luozhu is one of the three major state-owned bearing enterprises. It has strong technical research and development capabilities, a comprehensive bearing product matrix, a wide range of application scenarios, and a sales network at home and abroad. Luozhu Company was founded in 1954. Its predecessor was Luoyang Bearing Factory, one of the country's 156 key construction projects during the “First Five-Year Plan” period. It is one of the largest comprehensive bearing manufacturers in the Chinese bearing industry. Luozhu has the first batch of industrial technology centers certified by the country, has a complete bearing R&D testing platform, and has leading advantages in bearing R&D, manufacturing, inspection and testing. Currently, Luozhu's product line covers nine major types, more than 20,000 types. The product size ranges from an inner diameter of 10mm to an outer diameter of 13.5m. It has core technologies such as rail transit vehicle bearings and special bearings for major equipment. The products are widely used in wind power, rail transit, automobiles and motorcycles, mining and metallurgy, construction machinery, machine tool motors, industrial gearboxes, medical devices, etc. Luozhu has 48 regional sales representatives and nearly 300 sales agents across the country, and has subsidiaries or offices in the United States, India, etc., and its products are exported to more than 70 countries and regions.

Strategic investment in Luozhu helps the company develop the wind power roller product market, consolidate the technical advantages of bearings, and can be expected to expand and strengthen the main bearing business. Luozhu is a domestic leader in the fields of wind power bearings and shield engine bearings, and has great demand for high-precision wind power rollers. The company's proposed strategic investment in Luozhu will help develop wind power roller products and form a synergy effect in bearing technology and other fields.

Investment advice: We expect the company to achieve revenue of 35.74/43.6/5.273 billion yuan in 23-25, respectively, and achieve net profit of 1.84/2.54/305 million yuan, corresponding to PE 38.63/28.02/23.34 times, respectively, for the first time covered, and given a “recommended” rating.

Risk warning: demand falls short of expectations, new product development falls short of expectations, customer development process falls short of expectations