Introduction to this report:

The company is deeply involved in the precision parts industry, expands the NEV component business with strong technology accumulation, and explores the second growth curve. This announcement plans to raise additional capital to expand NEV component production capacity to help the company develop its market.

Key points of investment:

Investment suggestions: As a leading commutator company, the company has opened a second growth curve to expand the NEV component business. The product technology has remarkable advantages. The company announced that it plans to raise capital to expand NEV component production capacity to help the company develop the market and improve the company's competitiveness. The 2023-2025 EPS was maintained at 0.27, 0.64, and 0.94 yuan, and the target price was maintained at 17.06 yuan, increasing holdings.

Incident: The company announced that it plans to issue shares to specific targets through simple procedures to raise capital. The proposed capital is no more than 280 million yuan, with a total project investment of 390 million yuan, mainly used for: ① Huizhou New Energy Precision Connector Production Expansion Project, with an estimated investment of 220 million yuan; ② Shenzhen New Energy Precision Connector Production Line Technology Improvement Project, with an estimated investment of 0.9 billion yuan; ③ Additional liquidity capital, with an estimated investment of 0.8 billion yuan.

The new business expanded smoothly domestically, and the construction of production capacity helped increase market share. With its deep accumulation in the fields of ultra-precision metal and plastic molding and polymer engineering materials, the company has entered the NEV components business, won wide recognition from overseas core customers, expanded smoothly in the domestic market, and opened up room for growth. The capital raised this time is mainly used to expand the production capacity of connector products and technical reform of existing production capacity in new energy vehicle components. As the company's production capacity is released, it is optimistic that the company's new business expansion will drive revenue growth and further increase the company's market share.

The production and sales volume of new energy vehicles have increased rapidly, and the company's new business has opened up room for growth. From January to October 2023, China's NEV production reached 7.352 million units/year on year +33.9%. We estimate that after the company entered products such as power battery pack components, drive motor connectors, and electronic control system inverter components, etc., the product market space in the automotive sector increased from 3-4.6 billion to 26-48 billion, and the products were certified by Mercedes-Benz, Toyota, and leading domestic NEV companies.

Risk warning: The penetration rate of new energy vehicles falls short of expectations, and market expansion falls short of expectations.