Wuzhou Xinchun is deeply involved in precision bearing manufacturing, and the scale has been steadily expanding: starting with Wuzhou Xinchun bearing ring products, gradually diversifying products based on precision manufacturing technology synergy and industrial chain layout. In 2014, it relied on a single bearing business to achieve revenue of 923 million yuan. By 2023, it relied on the three major businesses (bearings, automotive parts, thermal management systems) to generate revenue of 3.106 billion yuan, a CAGR of 14.43%. The customer base expanded significantly, and the sales share of the five major customers fell from 76.58% to 44.78% in 2014-2023; from export trade to a global layout, based on supply chain collaboration with overseas core customers, through the setup/capital increase of Mexican subsidiaries and mergers and acquisitions of European FLT, the company basically maintained a 30-60% range of overseas sales. While actively expanding, the company focuses on R&D-oriented transformation and upgrading. R&D investment increased from 31 million to 101 million in 2016-2023, with a CAGR of 22%. R&D investment basically remained above 3% of revenue, which is the basic support for the company's steady expansion to continue to develop healthily in terms of business structure, customer structure, and market structure.

Based on the core technology of bearing manufacturing, “double collaboration” in technology & field to achieve platform-based expansion:

The company's production chain is complete, including bearing steel pipe production, forging, cold rolling, turning, heat treatment, grinding, and assembly, and has mastered key technologies in these processes, including production technology for high-end precision steel pipes and precision forging technology for high-speed forging. It has comprehensive heat treatment technology, such as annealing, normalizing, quenching and surface modification heat treatment, etc., to ensure the world's leading position in bearing heat treatment technology. Furthermore, based on the expandability of bearing technology, the company expands its business scope through technical collaboration and field collaboration, and enters various fields through investment and mergers and acquisitions: ① Through technical synergy, it independently invests in the development of finished bearings, wind power rollers, ball screws, etc., and enters fields with certain technical barriers such as automobiles, industry, and robots. ② Through field collaboration, product types such as automotive parts and automotive thermal management system components (acquisition of Xinlong Industrial) have been expanded through mergers and acquisitions, and the layout of the automotive sector continues to be deepened.

The company's three major businesses match market demand, in line with the development trends in the three fields of automobiles, wind power, and robotics: the automobile sector promotes new energy, and the value of bicycle support has increased: automobiles account for the highest share of downstream industries in the bearing industry, reaching 42.1%. The company's main bearing business has seized the high ground for new energy vehicles and launched new products such as transmission system bearings and drive motor bearings; the company has gradually completed the transformation and upgrading of thermal management system integration, and its unit price is about 6,000 yuan higher than traditional fuel vehicles; other supporting components include automotive ball screws and drive device parts. ① ② Wind power sector: Along with the increase in the localization rate of wind power bearings, the roller support customer system is gradually being formed. The dual carbon target promotes the steady development of the new energy power generation industry. Larger fans and localization of components are the core cost reduction measures. Therefore, the company develops wind power bearing roller products not only to supply foreign brands, such as Defontaine and Rot-Ed under ThyssenKrupp in Germany, but also actively supports domestic bearing manufacturers, such as Shaft Research Technology, Luo Shaft, etc. The planned output value of the company's fund-raising projects is 550 million yuan. In 2024, the actual demand, inventory removal situation, and industry competition will be planned to plan the construction progress of the fund-raising project.

③ Robotics field: Combines certainty and growth, and the entrance time for the Wuzhou Lunar New Year is appropriate.

In terms of reducer bearings, thanks to early technology accumulation, the company has now developed a full range of robot reducer bearing products, mainly supporting companies such as Dazu Harmonic and Laifu Harmonic. In terms of transmission components, the company has completed the development of trapezoid and ball screws, and is expected to complete the process and equipment of planetary roller screws in 2024, and build a professional chemical plant. The traditional industrial sector provides certainty for the company's growth, and in the field of emerging humanoid robots, with the advance layout of processing technology and equipment for bearings and screws, the company is expected to benefit first in the future mass production stage.

Investment advice:

We expect the company's revenue for 2024-2026 to be 33.9, 37.5, and 4.21 billion yuan respectively, with growth rates of 9.0%, 10.7%, and 12.2% respectively, with net profit of 1.8, 230, and 280 million yuan respectively, with corresponding PE being 37.3X, 28.9X, and 24.5X respectively; the company is driven by technological innovation, based on high-end equipment manufacturing and new energy, to allocate global resources. The product system and customer system will gradually be formed, taking into account R&D, testing, certification, The batch cycle, medium- to long-term dimensions, the company is expected to achieve steady expansion in business scale. The first coverage gave a buy-A investment rating. The target price for 12 months was 22.05 yuan, which is equivalent to a dynamic price-earnings ratio of 35X in 2025.

Risk warning: Raw material costs have risen, overseas demand falls short of expectations, competition in traditional businesses has intensified, expansion of emerging businesses falls short of expectations, humanoid robots have fallen short of expectations, and profit forecasts fall short of expectations.