The leading layout of the rolling industry is perfect, and the products continue to expand to the high-end category, which is expected to usher in the inflection point of long-term performance. The company's main products include steel balls and rollers. In addition to traditional steel balls, there are also reserves of special steel balls, such as precision microballs, ceramic balls, big balls and so on. In addition, the company's tapered roller products have been tested by the National bearing quality Supervision and testing Center, which is mainly supplied to the subordinate factories of Skyver Group, which is expected to grow in the future. In addition, the company's fixed assets increased from 280 million yuan to 530 million yuan from 2016 to 2020, with the corresponding annual depreciation and amortization increasing, and the total depreciation of the company's fixed assets in 2020 was 60 million yuan. We believe that with the continuous improvement of the company's revenue in the future, economies of scale are expected to be clearly reflected, leading to an increase in profit margins.

The domestic market of rolling body can reach 17 billion yuan, and the rapid development of downstream electric vehicles, wind power and other industries has led to the continuous expansion of the industry space. The rolling track is of high quality, with a total static size of about 17 billion yuan, and with the gradual replacement of fuel vehicles by downstream electric vehicles and the rapid growth of wind power installed capacity and other factors, showing a trend growth trend.

Among them, we estimate that the market space of the steel ball industry is about 7 billion yuan, of which the main independent suppliers are overseas leading Chunzhongdao and Lixing shares, while other major domestic steel ball enterprises have weak market competitiveness; the roller market space is about 10.6 billion yuan, which is mainly produced by bearing factories such as Chunzhongdao and Skaifu, which are more difficult to design and manufacture than steel balls. At present, domestic manufacturers are basically not involved. In recent years, the rapid development of roller bearing downstream industry, especially the development of wind power industry and domestic high-speed rail industry, has brought good development opportunities to the roller market, especially the localization of high-end roller market.

In the rolling body domestic substitution and foreign cooperation tide, the company ushered in the historical development opportunity. (1) for the sake of supply chain security, high-speed rail, 5G, military, offshore wind power, shield and many other industries are promoting domestic substitution in the rolling body field, and the company, as the domestic leader in the rolling body industry, is expected to benefit obviously; 2) the leading bearing enterprises represented by Skyver and Schaeffler, for cost and professional considerations, will make the outsourcing of their rollers the leading development trend of the bearing factory in the future. We believe that the outsourcing procurement of bearing manufacturers has higher requirements on the quality and production capacity of the roller, which is conducive to the development of the rolling head enterprise. in the case of insufficient production capacity of the overseas roller leader, the company is expected to become the biggest beneficiary.

The comparative advantage obviously overlaps the card position advantage, casting the company deep moat. At present, the company has obvious product advantages over domestic competitors, and the certification cycle of high-end bearings represented by Skyver Group is two to three years, which makes the entry barrier to the precision steel ball market higher. The company is the only domestic company to enter the global procurement system of Skyver Group, and has obvious advantage of first-mover card position in cooperation with Schaeffler, Ensk, NTN, Jettaigt and other global leading bearing manufacturers.

Profit forecast and valuation suggestion: we believe that the next 2-3 years will be a highlight moment for the intensive release of the company's high-end new products, bringing the double improvement of the company's revenue scale and profit margin as well as greater performance flexibility. The company has entered a period of high-speed growth of "power shift". It is estimated that the return net profit of the company from 2021 to 2023E is 1.40,2.35 and 327 million yuan, which is valued by 30-35 times PE in 2021, corresponding to a market capitalization of 41.9-4.89 billion yuan and a reasonable value range of 16.93-19.75 yuan per share, which is rated as "better than the big market".

Risk tips: downstream demand fluctuations, raw material price fluctuations, the impact of the epidemic exceeded expectations.