Investment logic: the company is the leading enterprise in the global MIM industry, with outstanding technological advantages, leading market share of energy production, and a deep and stable customer base in the field of MIM. 1) medium and short term: benefiting from the volume of terminal demand, the compound growth rate of income from folding screen mobile phone hinges and wearable MIM parts will reach 50% in the next three years. 2) in the long run, the company's power transmission and heat dissipation business, the compound growth rate of income in the next three years is expected to exceed 100%, opening a new growth curve.

Folding screen mobile phone: the market accelerates volume, and the company is expected to benefit directly as a core supplier of hinge MIM parts.

1) Industry level: thanks to product performance upgrading and price sinking, global folding machine shipments have achieved explosive growth in 2021, with a year-on-year growth of + 264%. It is expected to reach 28 million units in 2023, and the penetration rate will increase from 0.18% in 2020 to more than 2.5%. With the upgrade of U-shaped hinge structure to water drop type, the single machine consumption and value of hinge MIM parts may increase significantly in the future. It is expected that the market scale of hinge and hinge MIM parts for folding screen mobile phones in 2023 is expected to exceed 70 or 2 billion yuan, all of which will achieve an increase of more than 3 times. 2) at the company level: at present, S customers in the folding screen mobile phone market are dominant, with a share as high as 90%. The company is the main supplier of S customer hinge MIM parts, and the sustained high growth of S customer shipments in 2022 will contribute an important increase to the company's performance. H customer folding machine products with iterative optimization, shipments are expected to accelerate the volume, stack company share increase, will also thicken the company's performance. XIAOMI, Glory and ov are also actively laying out the folding machine field, and the company is actively developing new projects in its hinge MIM parts supply chain, which is expected to open up new incremental space in the future. At present, the company actively participates in the hinge assembly of folding machine, and the value of its hinge supply will be further enhanced.

Wearable: MIM process is more suitable for wearable equipment parts, and terminal volume injects long-term growth momentum for the company. 1) Industry level: at present, Android watches use more MIM pieces, and brand A watches are gradually cut into MIM; in addition, many parts in the XR head display also use MIM technology. We believe that the increase of MIM process penetration and the increase of stand-alone usage in wearable devices will become an industry trend in the future. it is estimated that the potential market scale of wearable MIM pieces will reach about 4 billion yuan by 2023. 2) at the company level: at present, there is a trend that MIM technology is gradually infiltrating into exterior parts in A customer watches, and the stand-alone value of MIM pieces is expected to increase significantly; in terms of Android watches, with the improvement of the lack of core problems of H customers, the growth rate of watch shipments may gradually pick up, and the company's share of superimposed companies will increase, and the company's watch products are expected to rise in volume and price. In addition, the company has cut into part of the VR equipment supply chain, with the terminal blue ocean market accelerating volume, the future is expected to contribute to the company's long-term performance increment. At the same time, the company actively promotes material innovation in wearable products MIM parts, and the unit price and gross profit margin are expected to increase, further boost the company's overall profit level.

Transmission and heat dissipation: actively expand to the two hundreds of billions of markets of transmission and heat dissipation, which is expected to open a new growth curve.

1) Transmission business: in the future, the company will focus on transmission products with high value and added value, actively broaden the application boundaries of transmission products, and make efforts in high-growth fields such as smart homes and new energy vehicles. The company extends to downstream components, layout folding screen mobile phone hinge assembly business, 2022 shaft assembly business is expected to hit the ground, will contribute to the core increment of the transmission business. 2) Heat dissipation business: following the trend of 5G, automobile electrification development and increasing diffusion heat demand, the company has entered the hundreds of billions of heat dissipation market and its products extend to downstream heat dissipation modules, and is expected to make efforts in the direction of new energy vehicles, servers, base stations and so on in the future. At present, the company's heat dissipation business is in the stage of small revenue and high growth, and the business is expected to double in the next two years.

Profit forecast and investment advice: we believe that the rapid growth of medium-and short-term corporate performance has a high degree of certainty, and it is expected that the compound growth rate of the company's return net profit from 2022 to 2024 is expected to reach 44.7%. Considering the core share advantage of the company in the folding screen hinge supply chain, it is a rare domestic MIM manufacturer that takes the lead in laying out the hinge assembly business and has the capacity of mass production, we give the company a certain valuation premium, giving the company 30 times PE in 2022, corresponding to the target market value of about 9.1 billion yuan, corresponding to the target price of about 58.8 yuan. Cover for the first time, giving the company a "buy" rating.

Risk tips: the shipment of folding screen mobile phones is not as expected; the penetration of MIM process is not as expected; the business expansion of transmission and heat dissipation is not as expected; the business integration and synergy of subsidiaries are not as expected; the intensified competition in the industry leads to a narrowing of the share and a decline in product prices.