Deeply involved in the field of electrical connectivity, the company specializing in battery connection systems and composite busbars is mainly engaged in the research, production and marketing of electrical connection products. The main products include battery connection systems and composite busbars. The downstream covers various fields such as new energy vehicles, electrochemical energy storage, rail transit, industrial frequency conversion, new energy power generation, etc., and has accumulated high-quality customers such as the Ningde Era, BYD, Farah Electronics, CRRC, Sunshine Power, Guoxuan Hi-Tech, Westinghouse Brake, Rockwell, Toshiba and Mitsubishi.

The battery connection system is tied to the Ningde Era and Tesla

A battery connection system is a structural component of the electrical connection within a battery module. It is the company's most important source of revenue and growth point. It can be divided into power battery connection systems and energy storage battery connection systems according to application fields. In 2017, based on technology accumulation in the field of hot pressing, the company applied the composite busbar heat pressing process to battery connection system production; in 2019, it was shortlisted as a power battery connection system supplier for the Ningde Era T project with competitive pricing; and began batch supply to it in 2020. With the successful implementation of the T project, the company's cooperation with Ningde Times in the field of power batteries expanded from a single project to popular models from various automakers such as Tesla, NIO, Ideal, Xiaopeng, Great Wall, and Celis, and began cooperation in the field of energy storage battery connection systems in 2021. At present, the company has become one of the main suppliers of battery connection systems for the Ningde Era. Sales revenue for the Ningde Era in 2023 accounts for 74.65% of the company's total revenue. Furthermore, according to the company's semi-annual report, the company's energy storage battery connection system products have been supplied in batches to Tesla and other energy storage projects, which are expected to benefit from the release of Tesla's energy storage production capacity in Shanghai.

Expand production capacity layout and enhance market competitiveness

The company went public and raised 0.87 billion yuan, of which 0.219 billion yuan was used to produce an 8 million power battery connection system expansion project, 0.385 billion yuan for the Chengdu battery connection system production project, 65.918 million yuan for the R&D center construction project, and 0.2 billion yuan to supplement working capital. After completion, the project will effectively expand production capacity, which will help the company expand its business scale, enhance market competitiveness, and further increase its market share.

Profit forecasting

The company's revenue for 2024-2026 is 2.186, 2.993, and 3.93 billion yuan, respectively, and EPS is 1.37, 1.87, and 2.45 yuan respectively. The current stock price is 23.8, 17.4, and 13.3 times PE, respectively. I am optimistic that the company's battery connection system products will benefit from “electric vehicle+energy storage” two-wheel drive and large customer volume, covering for the first time, giving a “buy” investment rating.

Risk warning

There is a risk that global demand for new energy vehicles falls short of expectations, the risk that global energy storage installed capacity falls short of expectations, the risk that competition will increase, the risk that a single major customer accounts for a relatively high risk, the risk of production capacity construction falling short of expectations, the risk of raw material price fluctuations, and the risk of exchange rate fluctuations.