Focusing on sawing business, the company has become the market leader of bimetal band saw blades in China.

① company positioning: domestic bimetal band saw blade market leader, high product coverage. The company was founded in 2003, specializing in sawing business for many years, the main products are bimetal band saw blades, is currently the industry's leading supplier of bimetal band saw blades, has covered the full product line, products including high-speed steel bimetal band saw blades and cemented carbide band saw blades, broadband coverage of 13-80mm. At present, the company has established sales and service networks in 40 countries or regions around the world, set up marketing service centers in 7 cities in China, and established cooperation with more than 300 special dealers. In addition, the company began to lay out precision electronics manufacturing business and consumer electronics products in 2020.

② operating status: the company has focused on the industry for many years, and its performance is expected to improve. The company's operating income and net profit have shown a steady upward trend in recent years. Although the net profit has declined due to the epidemic in 2020, the company has made positive adjustments to ensure the stability of domestic business and reduce the company's losses. In the future, while maintaining the steady development of sawing business, the company will also develop precision manufacturing consumer electronics business, and its performance is expected to be further improved.

③ ownership structure: ownership structure is conducive to the development of the company, employees are fully motivated. The actual control of the company is Mr. Fang Hong, who indirectly holds 28.60% of the company as of June 2021, while Zoomlion Heavy Industry Science and Technology is the second largest shareholder of the company, and the industry leader can help the company's long-term stable development. Through the implementation of equity incentives and employee stock ownership plans, the company can further improve its cohesion and competitiveness and promote the company's long-term sustainable development.

Industry level: widely used downstream + import substitution trend, industry leaders fully benefit.

① bimetal band saw blade: the "craftsman's hand" of metal cutting. Bimetal band saw blades, including high speed steel bimetal band saw blades and cemented carbide band saw blades, are necessary and efficient tools for metal cutting. With the characteristics of high hardness and good cutting effect, bimetal band saw blades have become the main saw blades in the configuration of band saw machines. it is widely used in automobile manufacturing, large-scale forging, aerospace, iron and steel metallurgy, nuclear power and other manufacturing fields. According to Chinese customs data, the export value of China's band saw blades rose from 111.6596 million yuan in 2017 to 191.7537 million yuan in 2020, with CAGR reaching 20%. Downstream demand growth is rapidly driving up the sales of band saw blades.

② high speed steel bimetal band saw blade and cemented carbide band saw blade have become the mainstream products. High-speed steel bimetal band saw blade takes high-speed steel as tooth material and cold-rolled alloy steel strip as back material, which can maintain high hardness and good red hardness in the case of high heat produced by high-speed cutting. Cemented carbide band saw blade takes cemented carbide as tooth material and cold-rolled alloy steel strip as back material, which has the characteristics of high hardness, good wear resistance, high efficiency, high precision, long service life and so on.

The prosperity of the ③ industry is rising, and the trend of import substitution is obvious. In recent years, the demand for cemented carbide band saw blades in China's military manufacturing, rail transit, aerospace, non-ferrous metals, nuclear power and other high-end equipment manufacturing industry is increasing, which promotes the development of bimetal band saw blade industry. Domestic brands have experienced a transformation process from scratch and from weak to strong. With excellent products, more competitive prices and services, import substitution has been gradually realized, and the share of domestic brands has reached 70% in 2015 from relying entirely on imports in 1985.

Competitiveness analysis: full product line coverage + perfect market layout and services + new business development ① product line covers high, middle and low-end products, and continues to launch new products. The company started the bimetal composite steel strip business in 2003 and entered the bimetal band saw blade industry in 2006. at present, the product line has covered all specifications from 13mm ultra-narrow band to 80mm broadband. The company attaches great importance to research and development and launched four new products in November 2020, which are SHD coating series, TTCUT series, HVCUT series and INC TECH series innovative products.

② perfect market layout and technical service system. The company takes the company headquarters, regional service center and dealer system as the core to solve the sawing problems faced by users in the process of pre-sale, in-sale and after-sale. At present, the company has set up sales and service websites in 40 countries or regions around the world, set up marketing service centers in 7 cities and established cooperation with more than 300 special dealers.

③ expands the company's business scope and promotes the company's performance growth. In the future, the company will cultivate precision manufacturing consumer electronics business and promote the company's performance growth on the basis of maintaining the steady growth of sawing business.

Coverage for the first time, giving a "overweight" rating. The company is a leading domestic bimetal band saw blade enterprise. in the future, with the improvement of the manufacturing "ten-year renewal cycle" and the acceleration of import substitution, the company's performance is expected to further grow. It is estimated that the company's revenue from 2021 to 2023 will be 491 million yuan, 600 million yuan and 736 million yuan respectively, which is + 21.78%, + 22.16% and + 22.64% respectively, and the net profit will be 68 million yuan, 91 million yuan and 116 million yuan respectively, which corresponds to 24, 18 and 14 times of PE respectively. At the same time, the company will maintain a leading position in the bimetal band saw blade industry in the future, further develop the consumer electronics industry, and the downstream application market will continue to extend. Coverage for the first time, giving a "overweight" rating.

Risk hints: the risk of macroeconomic fluctuations in the industry, the risk of fluctuations in the downstream application market, the risk that the company's product research and development is not as expected, the risk that the repeated epidemic affects the company's business more than expected, and the risk that the public data used in the research report may lag behind or not updated in a timely manner.