Recommended logic: 1) Global communication technology is being upgraded to 5G. We predict that the number of global 5G base stations will reach 9.75 million in 2026. The huge demand for 5G base station construction will drive demand for aluminum die-casting parts, and the company will fully benefit from its leading communication equipment manufacturer resources and leading technology; 2) The company seizes new energy transformation opportunities for automobiles, actively develops aluminum die castings related to new energy, and rapidly develops leading customers such as Tesla and BYD. The performance is expected to continue to grow; 3) We estimate that the domestic NEV integrated die-casting market is expected to reach 2026 At 67.6 billion yuan, the company has purchased 8800 tons of equipment to enter integrated die casting, and plans to jointly develop a 0.02 million ton cold chamber die casting machine with Haitian Metal in 2023. The pace of capacity expansion is accelerating, and there is plenty of room for growth.

In-depth cooperation with industry leaders in the communications field, 5G base station construction is a future growth. Currently, the signal coverage of 5G base stations is lower than that of 4G base stations. According to estimates, the demand for 5G base stations alone can reach 1.5 times that of 4G base stations, and the huge construction demand for 5G base stations will drive demand for aluminum alloy structural components of base stations. We predict that by 2026, the number of 4G base stations in China will reach 6.78 million, and the number of 5G base stations will reach 6.3 million. In the communications sector, the company's customers are mainly leading communication equipment manufacturers such as Huawei and Ericsson. According to Dell'Oro Group statistics, in 2023, Huawei occupied the top position in the global telecom equipment market with a 30% market share, and Ericsson held the top three positions with a market share of 13%, accounting for more than 40% of the total market share. The company will fully benefit from leading technology and high-quality customer resources in obtaining orders for aluminum die-casting parts for communication base stations.

Following the new energy transformation of the industry, new energy customers in the automotive sector drive new growth. The company started with die castings for traditional vehicle housings, and quickly responded to the new energy transformation opportunities in the automotive industry to develop and produce aluminum die-castings related to the NEV sector. With its technical advantages, the company quickly developed leading NEV customers such as Tesla and BYD based on the development of existing customers. In 2020, the company formally established a cooperative relationship with BYD. In 2021, BYD related products were mass-produced and supplied, and in 2022, the company's sales revenue to BYD grew rapidly.

We predict that in 2026, sales of pure electric passenger vehicles will reach 10.92 million units and 7.27 million hybrid passenger vehicles, and it is expected that cooperation with leading customers will be further deepened in the future.

Die-casting technology is fully laid out, and the core technology of the integrated die-casting process is mastered. Integrated die casting has high barriers in the four major aspects of materials, equipment, molds, and processes. Merisin laid out early talent reserves and process research for oversized integrated die casting in 2019. It took the lead in purchasing 8800 tons of oversized die-casting equipment in 2021, successfully prototyped oversized die-casting products for customers in 2022, and received orders for customer products. In February 2023, the company held a ceremony to launch the oversized integrated battery pack die-casting. The mold for this project was independently developed and manufactured by Guangcheng Mold, a wholly-owned subsidiary of Merisin Technology, indicating that the company has fully mastered the core technology of the entire oversized integrated die-casting process. With the gradual expansion of production capacity, the company has broad room for growth.

Profit forecast and investment advice: We expect the compound growth rate of net profit to be 25.5% in 2024-2026, with a valuation of 20 times in 2025, with a target price of 21.6 yuan for the first time.

Risk warning: Major customer growth falls short of expectations; 5G technology development falls short of expectations, 5G base station orders reduce risk; integrated die-casting business progress falls short of expected risk; NEV industry demand falls short of expected risk; overseas customer development falls short of expected risk.