The market share of the leading domestic production of harmonic speed reducers continues to rise. The company is in the precision transmission industry. Its main products include harmonic reducers and precision components, mechatronic products, intelligent automation equipment, etc. The main downstream application fields are industrial robots and service robots. Deeply involved in the field of harmonic reducers for 20 years. In 2021, the domestic market share of the company's harmonic reducers was 24.7%, ranking second, successfully breaking the monopoly of overseas brands. Taking advantage of the rapid take-off of domestic industrial robot development, the company's revenue grew from 176 million yuan in 2017 to 446 million yuan in 2022, with a CAGR of 20.47%; net profit to mother increased from 49 million yuan in 2017 to 155 million yuan in 2022, with a CAGR of 26.16%. The shareholding structure is centralized. As of Q3 2023, the company's chairman Zuo Yuyu and vice chairman Zuo Jing (brother relationship) each held 20.38% of the company's shares, totaling 40.76% of the company's shares, and were the actual controllers of the company.
Focus on precision manufacturing, R&D+capacity+brand to consolidate the leading position in the industry. 1) Research and development: Positive development of harmonic speed reducers and establishment of a new theoretical system for tooth profile design. With the advantage of self-developed harmonic reducers, we develop mechatronic products and improve the company's product matrix. Improve the company's technical talent structure and continue to invest in R&D. As of 2023H1, it has 6 overseas patents and 121 domestic patents. 2) Production capacity: Production expansion is accelerated. In 2027, the production capacity of harmonic speed reducers is expected to be 1.59 million units and 200,000 mechatronic products. Flexible+automated production lines help improve production efficiency, help the company expand market share, expand well-known customers, exert scale effects, and lay out the blue ocean market for humanoid robots. 3) Brand: The key performance indicators of the product have reached the leading level in the industry, and the brand influence continues to improve, promoting the expansion of high-quality customers. At present, the company has achieved batch supply to domestic and foreign manufacturers such as Eston, Eft, Preferred Choice, and Universal Robots. In April 2023, a “Strategic Cooperation Framework Agreement” was signed with Sanhua Intelligent Control to further enhance brand advantages and enhance international influence.
Harmonic reducers: Downstream robots continue to grow, and as OEMs replace domestic production, speed reducer manufacturers ushered in development opportunities. 1) Industrial robots: The company's main products are precision harmonic speed reducers. Currently, the main downstream application fields are industrial robots and service robots. The increase in the industrial robot market size+localization rate is expected to continue to drive demand for harmonic reducers. 2) Humanoid robot: The industrialization of Tesla humanoid robots is worth looking forward to. Currently, the rotary actuator uses a harmonic scheme, and dexterous hands are expected to greatly increase the amount of harmonic reducers used. 3) Non-robotic field: Benchmark Hamanaco, broaden non-robot application scenarios, and increase research and development of harmonic reducers used in various fields such as precision CNC machine tools, precision laser processing equipment, and medical devices.
Mechatronic products: products are gradually released to lay out space for future growth. Mechatronic products have become an important development direction for precision transmission parts. Using the advantages of self-development of core components such as harmonic reducers, they expand downstream of the industrial chain and continue to develop new mechatronic products. 1) CNC turntable for machine tools: Domestic replacement of high-end CNC machine tools, increased demand for the CNC conversion rate of domestic machine tools and parts processing precision are driving the rapid development of the CNC turntable industry. 2) Hydraulic control products: The market size of the hydraulic industry continues to grow, and the application prospects of hydraulic control technology are broad. The company develops hydraulic control products in a timely manner to reserve potential business.
Investment advice: The company's net profit for 2023-2025 is expected to be 0.98, 1.66, and 270 million yuan, corresponding to PE of 195, 115, and 71 times. As demand for downstream industrial robots recovers and the company's production capacity for harmonic reducers and mechatronic products is gradually released, we believe that the company's performance growth over the next two years is highly certain, and the first coverage gives it an “gain” rating.
Risk warning: The development of the industrial robot industry and the localization process of key components fell short of expectations, market competition intensified, production capacity investment fell short of expectations, product development risks, gross margin fluctuations, etc.