Introduction to this report:

The company is a leading company in the micro transmission industry. It launched dexterous hand products and laid out a forward-looking robot circuit. At the same time, the company signed a memorandum of cooperation with Huawei, which is expected to strengthen cooperation between the two sides on robot tracks in the long term, and there is plenty of room for growth.

Key investment points:

Investment advice: The company is a leading enterprise in the domestic micro transmission industry. It continues to benefit from strong demand in the downstream automotive electronics and robotics sector, and its performance is expected to continue to grow. The profit for 2024-2026 is 0.22/0.275/0.354 billion yuan, corresponding to EPS of 0.92/1.14/1.48 yuan. The comprehensive PE/PB valuation gives the company a target price of 98.9 yuan, corresponding to 67.0 times PE in 2026. The first coverage is given an increase rating.

A veteran of the micro transmission system industry, automotive electronics is a new growth pole. Zhaowei Mechatronics has been deeply involved in the industry for many years. Its main product, micro transmission systems, have characteristics such as high accuracy, small size, and low noise, and can be used in various fields such as automotive electronics, medical care, intelligent consumption, communications, and robotics.

The company initially provided precision gears and motor parts to companies such as Panasonic and Nikon, and later joined the automotive industry supplier team such as Bosch with its strong component supply capabilities. In 2022, the company's product layout in the field of automotive electronics gradually entered the harvest period. In 2022, the automotive electronics industry accounted for 41.17% of revenue, and by 2023, it had accounted for more than 50% of revenue.

Humanoid robots are a blue ocean market, and the company's forward-looking layout is a dexterous racetrack. Tesla Optimus has gone through many technical iterations and upgrades, and the product is now gradually entering the preparation stage for mass production. A dexterous hand is a robot's top priority. Tesla's latest dexterous hand is a major upgrade compared to the first generation product, and the number of degrees of freedom has increased to 22, which can meet the usage needs of multiple application scenarios. The company has launched a variety of products in the field of robotics, including hollow cup motors and high-torque brushed DC motors. In addition, the company has a forward-looking layout for dexterous hands and launched a newly developed high-reliability dexterous hand driven by integrated fingers. The parameters and technology are at the advanced level of the industry.

Smart cockpits have broad prospects, and the company binds core customers to accelerate expansion in the automotive electronics industry.

Intelligent and interactive smart cockpits are the general trend. Looking at the market space, the front-end market for the main functional products of smart cockpits reached 77.5 billion yuan in 2022. The micro transmission system is the core component of the smart cockpit. Zhaowei Mechatronics's micro transmission products involve various core parts including rotating screens, air conditioning vents, hidden door handles, electric tailgates, electric spoiler, automatic steering wheel adjustment, and electronic parking brake systems. The company seizes new energy vehicle development opportunities and continues to deepen cooperation with core customers such as Bosch, BYD, Great Wall, and Huawei. It is expected that automotive electronics products will continue to expand in the future.

Risk warning: risk of humanoid robot industrialization falling short of expectations, risk of industrial policy falling short of expectations, risk of domestic NEV sales falling short of expectations