Pioneer of special forming machine tools, mainly engaged in heat exchanger equipment and precision presses. The company focuses on R&D, production and sales of special forming machine tools. In 2023, the company's business revenue for heat exchanger equipment, precision presses, and microchannel equipment was 2.65/3.07/121 million yuan, respectively. The company has now established strategic partnerships with many global corporate brands, including Denso Italy, Daikin, Panasonic, Hitachi, Germany's Mahle, Faleo, Gree, Midea, and Oaks. More than 70 countries and regions use the molding equipment produced by the company. Since 2008, the domestic market share of heat exchanger equipment has been at the forefront of the industry.

Microchannel products have high barriers and enjoy high premiums, and priority is given to introducing them to high-end overseas markets. The company's microchannel products have a high starting point, and the original technical team is from the UK; the company invests heavily in R&D team building, and microchannel products are continuously iterated in R&D, creating high technical barriers. In addition, the company has a good customer base for microchannel products, and initially directly entered high-end markets such as the top 20 international auto parts companies such as Mahle, Valeo, and Denso. The gross margin of the company's microchannel products remains above 50% all year round, and its comprehensive business capabilities remain leading in the domestic industry.

The battery structural parts business injects growth momentum into the supply chain of leading customers: The company has put into operation high-tonnage precision molding equipment for Kirin 3.0 battery structural parts, has developed and prepared a mass production plan for 46 series large cylindrical battery shell forming servo presses, and has now received orders for 46 series large cylindrical mass production lines, covering customers including Tesla's first-level suppliers. The company's 46 series large cylindrical battery structural parts equipment can enter Tesla's supply chain through Nanjing LG, Panasonic, and Zhenyu Technology-Ningde Era. 46 series large cylindrical batteries are expected to be released in 2024, and the installed capacity of 46 series batteries is expected to exceed 100 GWh. The company is expected to take the lead in seizing market share with strong technical advantages and customer networks.

Investment advice: Pioneer in metal forming machine tools, presses in the field of new energy vehicles open up room for growth. We expect the company to achieve operating income of RMB 1,000/12.13/RMB 1,319 million and net profit to mother of RMB 227/2.83/308 million yuan in 2024-2026. The corresponding PE was 16.03/12.84/11.82 times, respectively. It was covered for the first time, and a “gain” rating was given.

Risk warning: downstream customer production expansion falls short of expectations; risk of declining gross margin; risk of RMB exchange rate fluctuation; risk of equity pledge