Oil and gas equipment was divested, and Hongtian's business structure continued to be optimized: In 2022, the company acquired 51% of Hongtian Technology's shares. Hongtian Technology is a professional copper foil equipment company and an equipment supplier for leading copper foil companies such as Zhongyi Technology and NORD, and the target assets are of high quality. It also gradually divested oil and gas equipment assets, and successively sold shares in subsidiaries Chengdu Dawson, US Dawson, Singapore Dawson, Dawson Valve, and Jiangsu Longsheng. The asset structure and business of listed companies were further optimized. In 2023, the company increased its shareholding in Hongtian Technology to 81%. The shareholding ratio was further increased, and the company's profitability was strengthened.
Copper foil equipment is being replaced by localization, and composite copper foil equipment is opening a second growth curve: Early copper foil equipment relied on imports from Japan, especially cathode rollers. The company achieved technological breakthroughs and localized copper foil equipment. At the same time, the company's domestic copper foil equipment was exported overseas, and its market share gradually increased; in 2023, the company invested a new energy high-end equipment manufacturing project in Nantong, with a total investment of 1 billion yuan to build an annual output of 100 sets of vacuum magnetron sputtering equipment, 100 sets of vacuum evaporation equipment, 100 sets of composite copper foil all-in-one equipment, etc., and the volume of composite copper foil equipment is imminent.
Project orders were gradually implemented, and the trend of the composite copper foil industry was determined: In April 2023, the subsidiary Hongtian Technology's next-generation “vacuum magnetron sputtering all-in-one machine” was released and received the first batch of orders for composite copper and aluminum foil production equipment, with an order amount of about 70 million yuan. In July 2023, the company announced orders with NORD Co., Ltd. for the composite copper-aluminum foil all-in-one machine “winding magnetron sputtering coating machine” (can be coated on both sides of the metal), “winding magnetron sputtering evaporation composite coating machine” (can be coated with aluminum on both sides), and “coil evaporation coating machine” (can be aluminized on both sides). The new order reached 184 million yuan, and orders for composite copper foil all-in-one machines increased dramatically. As the industry grows, all-in-one equipment shipments are expected to increase further.
Investment advice: As a leading manufacturer of copper foil production equipment in the industry, the company took the lead in laying out composite copper foil equipment, and the growth rate is high. We expect to achieve operating income of 21.45/22.98/2,542 billion yuan in 2023-2025, and net profit of 1.83/2.78/348 million yuan, corresponding to PE 24.41/16.09/12.86 times PE. This is the first coverage and a “gain” rating.
Risk warning: The development of the copper foil industry falls short of expectations; the market pattern deteriorates; the risk of changes in technology routes.