Business description: The company is deeply involved in the field of automation, and its business targets various fields such as 3C, new energy and semiconductors. Among them, the 3C business is the company's cornerstone business, accounting for about 76.39% of revenue in 2023. The new energy business is the company's second largest business, accounting for about 17.38% of revenue in 2023.

Financial performance: In 2019-2023, the company's revenue increased from 2.111 billion yuan to 4.84 billion yuan, with a compound growth rate of about 23.05%. In 2024 H1, the company achieved revenue of 1.834 billion yuan, a year-on-year increase of 12.47%. Among them, the growth rate of the new energy business was quite impressive. In terms of profitability, the company's net return interest rate continued to rise to 8.06% from 2022 to 2023. The 2024-2025 performance assessment target in the company's equity incentive plan is a net profit margin of not less than 8.5% and 9.0%. We believe that the company's profitability is expected to continue to rise.

1. 3C business: As a leading company in the fruit chain assembly section, the company is expected to benefit from Apple's innovative year+automation rate improvement logic

Since the company became an Apple supplier in 2010, the 3C business has dominated, and Apple is the company's largest customer in the 3C business. In the process of development, the company expanded horizontally and vertically, covering more terminal equipment production lines. On the other hand, the company extended from backstage assembly to modules and components. Historical data shows that the strength of Apple's hardware innovation determines the extent to which equipment companies benefit. Next year is expected to be Apple's innovation year, and the company, as one of its core suppliers, is expected to benefit deeply. In addition, Apple is actively promoting labor reduction plans. Since 2016, the company has been studying flexible modular production lines, and in 2023, it will deliver more than 40 units. It is expected to cover more process links in the future, and it is expected to expand into the production of other consumer electronics terminal products.

2. Other businesses: diversified layout to create a new growth curve

1) New energy business: Products include special lithium battery equipment, intelligent charging and switching station equipment, and automotive automation equipment. The new energy business is under pressure in the short term and promising in the long term. The key now is the restoration of profitability. From the gross margin level in the first half of the year, it can be inferred that the profitability of the new energy business has been repaired. 2) Semiconductor business: One of the strategic layout directions, in the early stages of development. 3) Core components: self-supply+export sales, four major matrices for collaborative development.

Profit forecast and investment advice: In 2024-2026, the company is expected to achieve operating income of 5.252, 5.986, 7.076 billion yuan, and net profit to mother of 0.468, 0.612, and 0.837 billion yuan, with year-on-year growth rates of 19.94%, 30.71% and 36.77%. Saiten Co., Ltd., Tianzhun Technology, and Quick Smart were selected as comparable companies. The four comparable companies had a 25-year average PE of 27X, and Bozhong Seiko's 25-year PE of 25X. We believe that the company has diversified its layout and has many future business growth points, giving it a “recommended” rating.

Risk warning: Downstream sentiment recovery falls short of expected risks, risks of falling short of expectations in new business areas, increased risks due to competition, etc.