We believe that Modine's manufacturing transformation process provides strong reference value for traditional thermal management companies whose main business is thermal management. The two businesses of Silver Wheel and Modine have a high degree of overlap. They are both in a critical period of traditional business transformation. The transformation direction is focused on high-quality tracks such as liquid cooling, energy storage, and integrated cooling modules in data centers, and the volume of revenue and profit is comparable. Referring to the transformation process and valuation level (30xPE) of Modine Manufacturing, the digital and energy division of Yinlun Co., Ltd. has a large market space, and the competitive pattern and profit margin are superior to traditional auto parts. Referring to the valuation level of Modine Manufacturing, it is currently not fully priced.

The current overall valuation of Silver Wheel is lower than that made by Modine due to the following reasons:

1) High-growth businesses account for revenue and have different layout times (Modine's manufacturing layout is earlier, liquid cooling+data center business accounts for 33% of revenue); 2) Different competitive environments suppress valuation (competitive pressure on domestic auto parts is greater than in North America, Europe, etc., and the North American data center liquid cooling explosion point is earlier than in China);

The expected increase in the subsequent valuation of Silver Wheel Co., Ltd. is mainly due to the following reasons:

1) The total revenue and profit growth rate of Yinlun Co., Ltd. is expected to be higher than that of Modin, and has stronger cost control capabilities (excellent ability to control the cost rate during the period); 3) The digital and energy division of Yinlun Co., Ltd. is gradually entering a critical period of mass production of fixed-point projects. It is at a critical stage of 0-1, and its performance contribution is expected to continue to increase in the next 2-3 years.

In summary, we believe that Yinlun Co., Ltd. is in a critical period of traditional business transformation. The traditional automotive infrastructure business has remained stable. The digital and energy division has a forward-looking layout of high-growth businesses such as energy storage, liquid cooling, and data centers, and is expected to gradually expand in the next 2-3 years. The company's revenue for 2024-2026 is expected to be 13.19, 15.05, and 17.38 billion yuan in that order, with year-on-year growth rates of 19.7%, 14.1%, and 15.5%, and net profit to mother of 0.83, 0.991, and 1.235 billion yuan in that order, corresponding PE is 18, 15, and 12 times, and EPS is 1.00, 1.20, and 1.49 yuan, respectively, for the first time coverage.

Risk warning: Market risk due to macroeconomic uncertainty, risk of supply chain instability due to fluctuations in raw material prices (aluminum prices, copper prices, etc.), risk of OEM price cuts affecting profit margins, increased market competition, risk of dependence on important customers, and risk of external factors such as shipping and exchange rates affecting profit margins.