The company is a leading company in cooling and electromagnetic shielding solutions. It will be driven by multiple booming trends such as AI computing power (liquid cooling/air cooling) and AI terminals (AI phones/AIPC/MR), and the performance is expected to exceed expectations.
1. Company Overview: Leading electromagnetic shielding and heat transfer service provider, benefiting from the rise of Huawei's multi-category business advantages: ① Products: Complete R&D and innovative product lines, integrated upstream and downstream manufacturing; ② Customers: Participate in customer R&D and design to provide localized services in combination with domestic manufacturing and domestic and overseas sales outlets.
Cooperation with Huawei: The company has cooperated with Huawei since 1997, and has cooperated in the fields of servers, communication equipment, etc. 2023H1 accounts for about 18% of customer revenue. Benefiting from mass production of some customer projects and increased mobile phone shipments, we expect Huawei's share of the company's revenue to increase in the future.
2. Server: Core supplier of air cooling and liquid cooling, AI-driven liquid cooling solutions accelerate penetration 1) Server: The company provides products such as heat dissipation and electromagnetic shielding to Huawei and superfusion customers. Customers include: Huawei, ZTE, Cisco, Inspur, Xinhua 3, Super Fusion, Shenzhou Kuntai, etc.
2) Liquid cooling: Liquid cooling will become the best choice for AI computing power requirements. The company provides server liquid cooling/siphon (single phase/dual phase) and other products, which have advantages such as technology and thermally conductive phase change materials. We believe that in the future, the global server industry chain may be further transferred to mainland China, and the company is expected to benefit from the increase in the scale of AI-driven liquid cooling and the increase in the value of liquid cooling to achieve a sharp rise in volume and price.
3. Smart hardware benefits from the expansion of Huawei phones+AIPC, and the demand for new energy core customers is steadily increasing 1) Smart hardware: ① Mobile phones: Benefiting from the recovery in sales of products such as the Huawei Mate 60 phone, and the company's future introduction of new products+increased stainless steel VC penetration rate, which is expected to achieve sales growth and increase in stand-alone value; ② PC: PC sales or recovery, and AI PC development brings incremental demand for products such as cooling and electromagnetic shielding. The company's products are expected to open up room for volume and price growth.
2) New energy: ① New energy vehicles: The company supplies Huawei cars and charging stations, and has Xiaomi supplier qualifications. Demand from the company's core customers such as Celis and Ideal continues to grow, and the company's new energy business will continue to benefit. ② Photovoltaics and energy storage: The company is cooperating in delivering products such as radiators and integrated die-casting parts to customers such as Huawei and Sunshine Power.
Investment advice: We believe that due to the macroeconomic environment and supply and demand relationships in some industries, etc., the revised 2023-2025 net profit is 1.27/4.22/ 607 million yuan, respectively, EPS is 0.22/0.73/1.05 yuan/share, respectively. The PE corresponding to the current stock price is 62.53/18.79/13.05 X, respectively, maintaining a “buy” rating.
Risk warning: Downstream industry demand recovery falls short of expectations, AI models fall short of expectations, risk of new energy development falling short of expectations, risk of raw material price fluctuations, increased market competition, domestic and foreign companies are not fully comparable. Relevant data and data on the target are for reference only.