Company level: The lithium battery equipment and e-cigarette business are working together, and the performance is expected to increase rapidly. The company's main business currently includes lithium battery front-end automation equipment and services and e-cigarette business. In terms of lithium battery equipment business, the company has strong technical strength, and its main customers include leading domestic and foreign battery companies. Benefiting from the industrialization of new energy at home and abroad in the past few years, the company's lithium battery equipment business achieved rapid growth. The company's overall revenue scale increased from 1.67 billion yuan in 2019 to 9.750 billion yuan in 2023, with a CAGR exceeding 55%; overall net profit to mother also increased from 165 million yuan to 554 million yuan, with a CAGR of over 35%. Against the backdrop of a short-term slowdown in the growth rate of the lithium battery equipment business, the company's second-curve e-cigarette business grew rapidly, helping the company's performance grow rapidly.

Lithium battery equipment business: Continued to benefit from the development of new technologies such as solid-state batteries and the expansion of overseas production. Technologically, through continuous R&D and innovation, the company's core equipment technology is in a leading position in the industry and continues to receive orders from leading domestic and foreign customers. It has outstanding competitive strength in front-end and mid-stage equipment. It is expected to benefit from the development of laminated battery technology and solid-state battery technology in the future and achieve rapid scale growth.

In terms of customers, it is linked to many well-known domestic and foreign manufacturers such as Ningde Era, BYD, LG, ACC, and BMW. The customer structure is continuously optimized, and it is expected that the share of overseas revenue will continue to increase in the future.

Furthermore, in terms of profit, we judge that the company's lithium battery equipment business has reached its low point (based on: ① the share of mid-tier equipment sales with relatively high gross margins is expected to increase; ② lower upfront costs due to early capacity expansion; ③ the company optimizes the supply chain system and procurement model to reduce supply chain costs; ④ the company strengthens the company's internal clean construction and continues to implement refined cost accounting and management), which is expected to gradually improve gross profit margin and increase net profit margin. Under the guidance of focusing on the main business of lithium batteries and the strategy of focusing on major customers, the company is expected to fully benefit from the overseas expansion process of major customers.

E-cigarette business situation: In terms of products, the company's subsidiary Skoll provides rich fruit e-cigarettes and continues to win the favor of European users. Since its brand SKE entered the UK market in the second half of 2022, its market share has continued to soar. As of August 2023, SKE's UK share ranking has risen to third place, and at the same time, it launched exchangeable e-cigarette products at the end of 2023. In terms of production capacity, the company's production capacity continues to expand, with more than 5,000 employees, a Shajing branch, and a manufacturing industry base of more than 20,000 square meters. At the profit level, operating income and net profit grew rapidly in 2023. As Skoll's market share in the UK rises rapidly and continues to expand in other overseas markets, the profitability of the company's e-cigarette business is expected to further improve.

Covered for the first time, a “gain” rating was given. The company is a leading domestic lithium battery equipment company. Relying on the first-mover advantage to lay out solid-state battery equipment, it is expected to fully benefit from the development of new technology. At the same time, the e-cigarette business continues to develop rapidly. The company's net profit due to mother for 2024-2026 is estimated to be $9.22, 11.87, and 1,475 million, and the corresponding PE is 12, 9, and 7 times, respectively.

Risk warning: Risk of fluctuations in the lithium-ion battery industry, risk of e-cigarette business policy risk, risk of exchange rate fluctuations, risk of market size falling short of expectations, risk of information used in research reports not being updated in a timely manner.