The company is an expert in high-end precision CNC lathes. Zhejiang Heidman has been deeply involved in CNC machine tools for 30 years and is committed to building a high-end product system. At present, the company has independently manufactured the three core components of the spindle, turret, and tailstock, obtained relevant technical patents, and also independently developed Heidman CNC systems to promote a new trend of domestic replacement. At the same time, the company is actively expanding sales channels. Starting in 2023, the company will gradually expand the proportion of dealers, enrich the original single and continuous sales model, and further promote overseas sales of domestic machine tools. In 2023, the company achieved operating income of 664 million yuan, +5.16% year-on-year, and realized net profit of 0.29 million yuan, or -50.71% year-on-year.

Machine tools are the cornerstone of the manufacturing industry, and the domestic market size exceeds 400 billion dollars. Machine tools have a wide range of applications and complex structures. Machine tools, known as tool machines or industrial mother machines, are essential key tools in the manufacturing industry. They are widely used in machinery manufacturing, automobiles, power equipment, railway locomotives, ships, defense industries, aerospace, petrochemicals, construction machinery, electronics and information technology industries. Lathes are one of the most common machine tools, mainly used to process various rotating workpieces. Through high-speed rotation of the spindle and relative movement of the tool, processing processes such as internal and external circular processing, drilling, car thread, cutting, car groove, car end surface processing, and car forming surface are realized. According to data from the China Business Industry Research Institute, the market size of China's CNC machine tool industry is expected to reach 432.5 billion yuan in 2024. The competitive pattern of China's CNC machine tool industry is scattered, and the market concentration is low. The domestic machine tool industry can be divided into three echelons. The first tier is foreign companies represented by Mazak and Demagison Precision Machinery, which have strong strength, and occupy the high-end market; the second tier is leading domestic companies, including Haitian Precision, Qinchuan Machine Tool, etc., which are in the process of transformation to high-end machine tools and mainly occupy the mid-range market; the third tier is many domestic small and medium-sized enterprises that occupy the middle and low end markets.

A singularity in the humanoid robot industry has arrived, and precision lathes are essential equipment for transmission parts. The robotics industry has shown the triple resonance characteristics of AI development & industrial giants & policy support, saving strength at the starting point of the industry. The emergence of multi-modal big language models represents a breakthrough in the “brain” level of humanoid robots. At the same time, industrial giants have entered the market one after another since 2022, and policy support from China, the US and other countries have been introduced one after another. Under the triple resonance, humanoid robots are expected to form a global industrial chain similar to automobiles and smartphones. Tesla humanoid robot linear actuators mainly use inverted planetary roller screws.

Planetary roller screws are expensive and difficult to manufacture. Previously, there was little demand, and they were generally imported. However, the import price is currently 10,000 yuan/pair. The cost is high, and it is difficult to meet the cost requirements for mass production of humanoid robots, so domestic companies want to produce their own planetary roller screws. However, domestic companies produce their own products and need to import related lathes and thread grinders. Overseas lathes and thread grinders are very expensive and customized. At first, the quantity was small, and it was also customized. Foreign companies had limited production capacity and were not very willing to supply. In addition, the sales model of foreign manufacturers is based on sales. After the customer places an order, it usually takes 2 years to get the equipment. The production and delivery cycle is very long, making it difficult to meet the mass production needs of humanoid robots in the future. Therefore, the localization and customization of screw equipment is an inevitable trend. In addition to the screw, the rotary actuator of a humanoid robot requires a speed reducer, and the core equipment for making the reducer is also a lathe and grinder.

The company's core technical capabilities are strong, and products are advancing towards high-end and diversification. Heidemann has achieved the autonomy of the three core components of the spindle, turret, and tailstock, and the market space is expected to continue to increase. In terms of sales, the company's high-end CNC lathes have a big advantage, and the distribution ratio has expanded in recent years, and the brand influence has gradually increased. The future is expected to benefit from the industrialization of humanoid robots.

Investment advice: We expect revenue for 2024-2026 to be 770 million yuan, 8.9 billion yuan, and 1.03 billion yuan, net profit to mother of 0.5, 0.75, and 100 million yuan. The current stock price corresponds to the company's PE of 76/51.5/40X. Heidemann is a leading domestic lathe machine. Its products are advancing towards high-end and diversification. At the same time, it is expected to benefit from the industrialization wave brought about by humanoid robots. For the first time, we have given it a “buy” rating.

Risk warning: risk of downstream demand fluctuation, risk of increased market competition, risk of errors in market space estimation, risk of new business development.