The company has been deeply involved in precision manufacturing technology for more than 20 years and is a domestic head bearing manufacturer. The company successfully developed RV reducer bearings and flexible harmonic reducer bearings, forwardly laid out roller screw series products, and grabbed the beach to take shape on an intelligent racetrack.

We have been deeply involved in precision manufacturing technology for more than 20 years, and vertical integration covers the entire industry chain. The company's main business is bearings, precision mechanical parts, automotive safety systems, and thermal management system components. For the full year of 2023, the company achieved operating income/net profit of 3.106 billion yuan/138 million yuan, respectively, -2.95%/-6.49% year-on-year, and 2024Q1 achieved revenue/net profit to mother of 773 million yuan/38 billion yuan, respectively, -4.60%/-5.84% year-on-year.

Bearing products and thermal management system components contributed to the company's main revenue and gross profit. Bearing products/thermal management system components accounted for 57.58%/26.63% of revenue in 2023, respectively, and 59.14%/19.22% of gross profit, respectively.

The company attaches importance to the development of industrial robots and humanoid robots, and related high-precision transmission components have been laid out. RV reducer bearings and harmonic reducer flexible bearings were developed in May 2023 to enter the industrial robot supply chain and develop robot bearing-related businesses. The company entered the NEV industry and successfully developed ball screw products in the fields of electronic parking (EPB), electromechanical braking (EMB) and electro-hydraulic braking systems (EHB) for new energy vehicles to support the localized development of NEV components.

In terms of humanoid robots, the company's products such as ball screws and roller screws can also be applied to humanoid robots, and it is expected to continue to grow in the future as humanoid robots are deployed.

With the support of large models, physical intelligence is progressing rapidly, and the launch of humanoid robots is expected to accelerate. Since Musk first released the humanoid robot concept machine on AI Day '21, the humanoid robot industry has continued to iterate, and development has now been successfully combined with large models. Using the generalization capabilities of large model transformer algorithms, robots have greatly improved their ability to understand and interact with the surrounding environment, which is expected to accelerate the industrialization of robots. Musk expects humanoid robots to exceed the shipment volume of one million units in the future, and the unit price is expected to drop below 20,000 US dollars, opening up room for imagination in the future market. According to the forecast of the China Business Industry Research Institute, China's humanoid robot market is expected to reach 870 billion yuan in 2030, with an average compound annual growth rate of 30% in 23-30. The company's related products are expected to benefit deeply from the development of the humanoid robot industry.

Strategic investment to strengthen Luozhu's main business, covered it for the first time, and gave it a “Highly Recommended” rating. On January 9, 2024, the company announced that it has formed a consortium with Aoluo Fuyu to participate in Guohong Group's public listing and transfer of 13% of Luozhu's shares. The two sides are expected to achieve technical and channel complementarity. We expect the company to achieve net profit of 186 million yuan/242 million yuan/284 million yuan respectively in 2024-2026, corresponding PE of 33.4x/25.8x/21.9x. This is the first coverage, giving it a “Highly Recommended” rating.

Risk warning: Demand in emerging sectors falls short of expectations, prices of upstream raw materials rise, and customer development falls short of expectations.