Key points of investment

Incident: (1) It is proposed to invest 15 million yuan in cash to increase the capital of Suzhou Daniu and obtain 15% of Daniu's shares; (2) it is proposed to invest 37.5 million yuan to establish a subsidiary with Anhui Ruishi Micro Intelligence (Dawson holds 75% of the shares; Ruishi Micro invests in core technology, and holds 25% of shares at the price of intangible assets).

Capital was increased to Suzhou Daniu, and the layout of composite fluid collector roll welding equipment was extended.

Suzhou Daniu was founded in 2015. Customers include Ningde Times, BYD, Zhongxin Aviation, Guoxuan Hi-Tech, etc. It mainly represents traditional spot welding equipment and independently developed complete roller welding machines. Currently, Daniu has shipped a number of all-in-one ultrasonic roller welding machines. This capital increase in Suzhou Daniu can enrich Hongtian's product line in the field of composite fluid collection and realize the layout from materials to battery end equipment.

The joint venture Swiss Micro focuses on expanding products in the pan-semiconductor field.

Ruishi Micro's core products include semiconductor chip packaging machines (suitable for high-speed and high-precision mounting of discrete devices, IC devices, silicon chips, etc.), visual inspection equipment (downstream including new energy, panels, PCBs, etc.), etc., which form a collaboration with the lithium battery and pan-semiconductor fields downstream of Hongtian's original vacuum coating equipment business.

Orders for composite fluid collector equipment are being implemented at an accelerated pace, and production is being actively expanded to ensure delivery capacity.

In April 2023, the company released a composite copper foil vacuum magnetron sputtering all-in-one machine. The first batch of orders for Hanyu New Materials landed in July, including 1 vacuum magnetron sputtering all-in-one machine and 1 vacuum magnetron sputtering evaporator; in September, we received another 184 million yuan order from NORD, and we expect to handle 5 devices. Currently, Dawson is increasing the implementation of intended orders, actively expanding the production capacity of composite copper and aluminum foil equipment, and speeding up the sampling and delivery process of vacuum magnetron sputtering and evaporation all-in-one machines. Hongtian signed an investment cooperation agreement with the Jiangsu Nantong Gangzha Economic Development Zone Management Committee to invest 1 billion yuan to build an annual output of 100 sets of vacuum magnetron sputtering equipment, 100 sets of vacuum evaporation equipment, and 100 sets of composite copper foil all-in-one equipment.

An employee stock ownership plan was introduced to demonstrate confidence in long-term development.

In December 2023, the company launched the first phase of the “Struggler” employee stock ownership plan, raising no more than RMB 26 million. The company-level performance assessment target is (1) Hongtian's revenue in 2024 is not less than 1.5 billion yuan, and achieving any of the following goals ① The total number of applications for Hongtian technology invention patents, utility model patents, software copyright and design patents shall not be less than 30 (inclusive), ② the Nantong high-end equipment manufacturing project (transition plant area) implemented by Hongtian Technology will be officially put into operation; (2) Hongtian's revenue in 2025 will not be less than 2 billion yuan. Furthermore, it achieved any of the following goals ① the total number of applications for Hongtian Technology's invention patents, utility model patents, software copyright and design patents was not less than 50 (inclusive), and ② the Nantong High-end Equipment Manufacturing Project (new factory area) implemented by Hongtian Technology was officially put into operation.

Profit forecast and investment rating: We maintain the company's 2023-2025 net profit of 2.1/37/480 million yuan. The current stock price corresponds to dynamic PE of 27/15/11 times, respectively, and maintains an “incremental” rating.

Risk warning: Downstream production expansion falls short of expectations, and new product expansion falls short of expectations.