A traditional oil and gas development equipment manufacturer, was founded in 2001 by acquiring Dawson Co., Ltd., a new energy enterprise transformed by Hongtian Technology, and is mainly engaged in the petroleum extraction equipment manufacturing business. Since 2022, the company has planned to acquire Hongtian Technology, the leading lithium battery copper foil equipment company in China, divest part of its original business, gradually transform into a high-end lithium battery copper foil equipment manufacturer, and accelerate the layout of composite fluid collection equipment. In 2023, the company achieved revenue of 2.237 billion yuan, +2.18% YoY, net profit to mother 0.205 billion yuan, +92.38% YoY, after deducting non-net profit of 0.148 billion yuan, +67.09% YoY. We expect the company's net profit to be 0.226/0.255/0.319 billion yuan in 2024 to 2026. Comparatively, the company's Wind agreed to expect PE 18 times in 24, giving the company 18 times PE in 24, corresponding to a target price of 19.44 yuan. The first coverage gave it an “increase in holdings” rating.

The industrialization of composite fluid collectors is progressing at an accelerated pace. The cost of all-in-one machines is approaching the two-step method, and there is still room for decline. The advantages of composite fluid collectors are high energy density, high safety, and lower theoretical costs. We estimate that the mass production cost of PET copper foil can reach 3.0 yuan per square, and PP copper foil is about 3.2 yuan per square meter, which is lower than the traditional cost of 4.7 yuan per square meter of copper foil. In terms of process routes, we have calculated that the theoretical cost of the one-step magnetron sputter/ magnetron sputter+water electroplating two-step method is 4.93/3.40/3.25 yuan/square meter, respectively. Currently, the cost of the all-in-one machine and the two-step method are close. Future improvements in the efficiency of the all-in-one machine and equipment price reduction will further reduce the cost. For example, if the line speed of the all-in-one machine is further increased from the current 15 m/min to 25 m/min, the cost can reach 3.15 yuan/square meter, which is lower than the two-step method.

Vehicle side replacement is poised, and the energy storage side can be expected to grow in the future. The initial cost of composite fluid collection equipment is large, and the initial cost of the composite fluid collector industrialization is high, and it is expected to be first applied to the car side that is less price sensitive. With breakthroughs in cost reduction on the copper foil side and battery side yield, vehicle-side penetration is expected to accelerate. The energy storage side is currently price sensitive, and the willingness to introduce composite fluid collectors in the short term is relatively low, but as the energy storage industry grows under power reform demand and marginal economic improvements, the increase after the penetration of composite collectors is also impressive. According to our estimates, the new demand for composite copper foil is expected to reach 297 GWh in 2030, the market space for one-step equipment is expected to reach 4.8 billion yuan, and the compound growth rate from 2025 to 2030 is 52%.

Traditional lithium battery copper foil equipment leader, layout of composite fluid collection one-step equipment to create the second growth pole 1) Traditional copper foil equipment: The subsidiary Hongtian Technology is the domestic leader in traditional lithium battery copper foil equipment. According to the company's official website, Hongtian Technology's comprehensive market share in '22 was 30%. Hongtian Technology's product performance is at the leading level in the industry, and core equipment such as cathode rollers is continuously being upgraded through technical iterations. The leading position is expected to remain stable. 2) Composite copper foil equipment: Hongtian Technology has firmly laid out a one-step approach. The composite copper foil all-in-one machine achieved a 0-1 breakthrough. It has now received orders from Hanli New Materials and NORD Co., Ltd., and some orders have successfully begun to be delivered.

Furthermore, the company maintains close cooperation with NORD Co., Ltd., a traditional copper foil leader, in the field of composite fluid collection through equity binding, and it is expected that it will continue to convert to orders in the future.

Risk warning: promotion of composite fluid collection is progressing slowly; product verification falls short of expectations; subsidiary acquisition, integration and sales progress falls short of expectations; risk of delays or cancellations of downstream customer orders.