Everything has a cycle, and the injection molding machine industry is no exception.

China International Capital Corporation's research report points out that from 2006 to the present, the injection molding machine industry has had a complete cycle every 3.5 years. Therefore, we can see that starting from last year, the revenue and profit of leading injection molding machine manufacturers have improved significantly.

However, unlike in the past, the injection molding machine industry may be facing more sustainable growth drivers this time.

Firstly, in 2017, the injection molding machine industry experienced a large-scale upgrade. Considering that the average lifecycle of injection molding machines is generally 8-10 years, we are now at the starting point of another round of upgrades.

In addition, in March of this year, the "Action Plan for Promoting Large-scale Equipment Upgrades and the Exchange of Consumer Goods" was officially announced, bringing long-term positive impacts to the injection molding machine industry.

This policy directly stimulates the demand for industrial equipment upgrades, and as one of the important equipment in industrial production, the demand for injection molding machines will also increase accordingly.

Against the backdrop of a stronger support for the current upward trend in the injection molding machine cycle, leading injection molding machine companies should be taken seriously. For example, LK Tech has seen a continuous increase in the proportion of its injection molding machine business in recent years. In the latest fiscal year, LK Tech's injection molding machine revenue reached 1.425 billion yuan, a year-on-year growth of 19.7%, accounting for 24.4% of the total revenue, and has become the main driving force for the company's growth.

LK Tech's ability to achieve rapid growth in the injection molding machine business is inseparable from its precise grasp of the industry's internationalization and high-end trends.

First, seeking new growth curves in overseas markets can enhance profit margins.

In recent years, going overseas has become a consensus for industries of all sectors seeking new sources of growth, and the injection molding machine industry is no exception.

In 2023, China's injection molding machine exports increased by 5.7% year-on-year to reach $1.714 billion, reaching a new historical high. In the first quarter of 2024, injection molding machine exports increased by 7.16% year-on-year, continuing the high growth trend.

As one of the top three injection molding machine manufacturers in the industry, LK Tech is at the forefront of the industry in terms of going global. Its sales and service network covers Japan, India, Southeast Asia, North America, and Europe. It even leads foreign counterparts in certain aspects. According to industry insiders, there are currently no large-scale injection molding machines in Japan, but LK Tech's large-scale machines have entered the Japanese market.

According to industry insiders, the overseas revenue of LK Tech's injection molding machines currently accounts for only 10% of the division's proportion, and this number may increase to 30% in the future.

On the other hand, for a long time, overseas brands represented by Europe and Japan have monopolized the high-end market due to their leading advantages in core technologies. Domestic manufacturers can only compete in the mid-to-low-end market. However, the transformation of domestic manufacturers towards high-end specialization has become a reality.

This is reflected in the prices of imported and exported injection molding machines. According to Wind data, the average import price of injection molding machines in China is approximately 3-4 times that of the average export price, but the price difference has been decreasing in recent years.

(Data source: WIND).

As one of the representative companies, LK Tech has spared no effort in the direction of high-end transformation in recent years.

For injection machines, high-end machines are not necessarily medical machines, but medical machines are definitely high-end machines. This is determined by the high precision and cleanliness characteristics of medical machines.

For example, disposable medical devices such as syringes and blood collection tubes commonly found in hospitals often require high cleanliness and precision; dental models, braces, dental crowns, and other products require precise dimensions and good surface quality; urinary catheters, intravenous catheters, and other catheters require high biocompatibility and sterility, all of which require dedicated medical injection machines.

(Source: Public information)

In order to meet the strict requirements of medical injection molding, every component parameter of the injection machine is carefully considered. For example, the ELE series medical special machine developed by LK Tech is designed in detail from mold locking to injection unit to serve the goal of high precision and pollution-free.

(Source: Public information)

In terms of mold locking, relying on professional finite element software optimized template and frame design, high-strength mold locking screw and servo motor drive technology, the goal of high precision, high durability and energy efficiency is achieved, without the trouble of hydraulic oil pollution, and the noise is significantly reduced.

In terms of injection unit, the ELE all-electric injection molding machine achieves the goal of ±0.1% product weight deviation control, which not only saves costs but also ensures high-quality product output. The production efficiency is improved by up to 30% thanks to the fast and smooth injection process, fully meeting the demand for high-speed production.

In the latest fiscal year, LK Tech's injection molding machine business in the medical supplies sector saw a year-on-year increase in revenue of 183.1%. High-end models such as medical machines have higher prices and gross margins, which helps improve the profitability of the company's overall injection molding machine business.

Second, technology establishes a core moat, and customized plants form differentiated advantages.

Generally speaking, electric injection molding machines have higher stability, production efficiency, and help reduce overall costs. They can be widely used in industries such as medical, packaging, 3C electronics, optics, food, and cosmetics.

For example, Haitian Int'l's Changfei YaZE electric injection molding machine can be used in the packaging and food industry; Yizumi Holding's FF series electric injection molding machine can meet the demanding requirements of precision electronic products in terms of dimensional accuracy, appearance quality, and complexity, and is widely used in the production of electronic products; Tederic Machinery's DE series high-speed injection molding machine can meet the needs of fast injection molding, greatly improving production efficiency, and can meet the needs of daily necessities manufacturing industry.

LK Tech's Elettrica all-electric injection molding machine, with its features of ultra stability, high efficiency, and excellent cost performance, can also cover the above-mentioned usage scenarios.

Taking the EL250 model as an example, this model adopts advanced all-servo control technology, achieving precise positioning of each electronic control axis with a high accuracy of ±0.01 millimeters. In addition, this model is equipped with the latest IPM (Intelligent Power Module) motor, which achieves more than 5% performance improvement in torque output compared to traditional motors, and can greatly improve equipment efficiency with advanced algorithms.

The new fifth-generation machine PT-V of the POTENZA-V series also adopts cutting-edge technology, featuring energy-saving, high efficiency, stable operation, and precise program control. The overall power of the machine is increased by 15%-25%, and the molding cycle is shortened by 10%-20%. It also uses a modular design and flexible expansion with diverse interfaces to meet customized customer requirements.

From a financial perspective, research and development expenses are front-loaded, while the revenue and profit growth brought about by research and development achievements are back-loaded. The value of the fifth-generation product in improving future performance is worth looking forward to.

In addition to improving the performance of the product itself, enterprise research and development also need to consider the changing trends of the industry and provide products that better meet the differentiated needs of customers.

Especially against the backdrop of Industry 4.0 gradually becoming the future development direction of the manufacturing industry, the injection molding machine industry is undergoing a transformation and upgrade towards intelligence, automation, and personalization. For example, in the past two years, the industry has widely carried out the automation of injection molding machine accessories, which means that in addition to providing customers with a bare machine, related supporting peripherals can also be customized according to customer needs.

LK Tech is a driver and participant in this trend. It can provide customers with customized factory planning, including lean layout, intelligent water and power layout, intelligent centralized feeding, automated solution design, and intelligent logistics planning to optimize the tailored solutions for the whole production process, which has higher rationality and can better meet customers' differentiated needs.

III. Conclusion

From international layout to high-end product transformation, from continuous investment in technological innovation to diversified expansion of finished product categories, the growth certainty of LK Tech is constantly improving.

However, the company valuation does not fully reflect this. As of the close on August 28th, the PE ratio of LK Tech was only 6.82 times, which is at a historically low level. Compared with peers, the value of LK Tech is also relatively undervalued.

(Source: Wind)

(Source: Wind)

Although the current market valuation of LK Tech has not fully reflected its intrinsic value and growth potential, considering LK Tech's outstanding performance in technological innovation, product upgrades, and market expansion, as the company's performance continues to grow, coupled with the recovery of overall liquidity in the Hong Kong stock market, this valuation disparity is expected to be rectified.