Recommended logic: 1) Air compressors are general machinery, with a market size of about 60 billion yuan. Among them, screw air compressors produce 0.5-0.6 million units/year, corresponding to a market space of about 15 billion yuan. The company's screw air compressor revenue share is less than 5%, and there is plenty of room for improvement. 2) The market concentration in the air compressor industry is low, and it is expected to concentrate on leading companies in the future.

High-end products such as oil-free screw machines and centrifuges have a localization rate of less than 10%, and there is plenty of room for domestic replacement. 3) The company independently develops screw hosts, and occupies a leading position in the country in the field of permanent magnet screw machines, gradually increasing its market share.

Revenue CAGR for 2019-2023 was 11%, and net profit CAGR was 12%, higher than the industry's 4% growth rate. The gross profit margin of screw machines is over 30%, which is higher than the industry average.

Air compressors are general machinery. The market size is about 60 billion yuan. Energy efficiency is the trend of the industry. Air compressor compressors are general equipment and are widely used in machinery manufacturing, petrochemicals, mining and metallurgy, textiles and clothing, medical care, food, cement, sewage treatment, power industries, etc. Among them, screw air compressors are an important subcategory of air compressors. China's air compressor market grew from 49.17 billion yuan in 2016 to 60.55 billion yuan in 2021, with a CAGR of 4.3%. Among them, the output of screw air compressors is 0.5-0.6 million units/year. If calculated at an average price of 0.025 million yuan/unit, it corresponds to a market space of 15 billion yuan. Air compressors account for about 15% of the total electricity consumption of large industrial equipment (such as fans, pumps, boilers, etc.), and account for about 9% of the country's total power generation.

With the vigorous promotion of energy saving and emission reduction policies, downstream customers of air compressors have higher and higher energy efficiency requirements. The energy consumption advantages and efficiency advantages of energy-saving air compressors are obvious, and demand is rising rapidly.

The competitive landscape of the air compressor industry is scattered, and there is plenty of room for domestic replacement of high-end products such as oil-free screws and centrifuges. The market concentration of the air compressor industry is low, and international brands represented by Atlas and Ingersoll Rand occupy the main share in the high-end market; high-quality domestic enterprises, such as East Asia Machinery, which independently master screw machine R&D and production technology, occupy the middle and high-end markets and have cost and price advantages; products in the low-end market have a high degree of homogenization and intense competition.

The compressed gas of an oil-free screw machine does not contain oil and can meet the needs of industries with strict air cleanliness requirements such as food, medical care, electronics, semiconductors, etc.; centrifugal air compressors have a large exhaust volume, exhaust pressure and range, and are mainly used in large-scale manufacturing fields such as electronics, steel, petrochemistry, shipbuilding, electricity and automobiles. High-end products such as oil-free screw machines and centrifuges have a localization rate of less than 10%, and there is plenty of room for domestic replacement.

The company's permanent magnet screw machine technology is leading, gradually increasing the domestic market share. The screw host is the core component of the screw air compressor, and its performance directly determines the performance level and product quality of the whole machine. The company independently develops screw hosts and has mastered more than 60 types of line designs. Its brand “Jaguar JAGUAR” air compressors occupy a leading position in the country in the field of permanent magnet screw machines all year round. From 2018 to 2021, the Ministry of Industry and Information Technology ranked first in the “Energy Efficiency Star” list for four consecutive years. Revenue CAGR for 2019-2023 was 11%, and net profit CAGR was 12%, higher than the industry's 4% growth rate. The gross profit margin of screw machines is over 30%, which is higher than the industry average. The company extended its high-end product line, gradually formed sales of vacuum pumps and oil-free screw machines, completed the development of centrifugal compressors, and accelerated their introduction to the market in the future. The company's current production capacity is 0.06-0.07 million units, and the convertible bond project will increase to 0.1 million units after delivery. Compared with Atlas, Atlas's development methods worth learning include: acquisitions to achieve multi-brand operations, focus on technological innovation and services, and continuous equity incentives. Currently, East Asian machinery's revenue scale is small, but it also places emphasis on technology and core personnel incentives, and there is still room for improvement in terms of extended mergers and acquisitions development and service revenue.

Profit forecasting and investment advice. Net profit due to mother for 2024-2026 is expected to be 0.23, 0.28, and 0.34 billion yuan respectively, corresponding to PE of 18, 15, and 12X, respectively. The compound growth rate of the company's revenue over the next three years is 22%, and the compound growth rate of net profit to mother is 28%, which is significantly superior to the industry. The company was given 18 times PE in 2025, corresponding to a target price of 13.14 yuan, covered for the first time, and given a “buy” rating.

Risk warning: The risk that demand growth will slow down due to the slowdown in fixed asset investment, the risk of increased market competition, the risk of fluctuating raw material prices, and the risk of new product expansion falling short of expectations.