Deeply involved in the field of motors for 20 years, two-wheel drive in the home appliance and auto parts business. Since its establishment, the company has focused on research and development of small household appliances, and has gradually expanded into the manufacture of small household appliances and automobile motors. It has leading motor technology. It has 20 invention patents and 144 utility model patents, including complete machines, motors, and various types of accessories. In terms of cleaning appliances, the company entered the ODM/OEM supplier system for TTI vacuum cleaners in 2012; in terms of small household appliances, the company completed cooperation with the new customer HOT in 2019 to develop a nursing home appliance product line. In 2023, the company achieved breakthroughs with many major customers such as Shark, and the small household appliance business revenue increased 69.83% year-on-year in the first half of the year; in terms of automotive motors, the company established a subsidiary Ningbo Dechang Technology Co., Ltd. in 2017 to enter the automotive EPS motor market. In 2021, it cooperated with Schaeffler and ZF Develop and test various types of motors, and achieve mass production in the automotive zero business in 2022. As of the first half of 2023, the company has achieved a total of 28 fixed targets for automotive motor projects, and revenue increased by 633.5% year-on-year.
Vacuum cleaner foundry has recovered, and various small household appliances have created a second growth curve. In the field of vacuum cleaners, according to inventory data from American manufacturers and dealers, the inventory of small household appliances has returned to normal levels. According to historical data, the low inventory level in the industry corresponds to a high revenue growth rate for the company's largest export customer (TTI). As the industry's inventory removal cycle comes to an end, TTI performance is expected to rise steadily, contributing to stable orders for the company. In the field of small household appliances, first, the company's share of HOT supply to major customers is expected to increase. High-end hair dryers all use high-speed digital motors, and the company's motor technology advantages can be directly replicated and transferred to personal care fields such as hair dryers; second, in 2023, various new customers of small household appliances were successfully developed, and breakthroughs were achieved with many major customers such as Shark during the year, and hair dryers and hair care instruments are expected to be rapidly released. In the field of robotics, the company carried out a forward-looking layout in 2023. It plans to develop strategic cooperation with five related companies to jointly build the Guangdong Humanoid Robot Innovation Center. The core technology of automobile motors can be reduced and transferred to a frameless robot torque motor, and the company is expected to enter a high growth track by relying on technical advantages.
EPS motors welcome domestic replacement opportunities, and the company's steady on-hand orders contribute to high growth. Benefiting from the trend of new energy and domestic substitution, the EPS motor market is booming. It is highly adaptable to autonomous driving of new energy vehicle EPS systems and is a key component for advanced intelligent driving. The domestic EPS motor market is expected to reach 5.71 billion yuan in 2025. Previously, the EPS motor market was dominated by foreign brands for a long time. Currently, domestic replacement is in full swing, and domestic companies' supply chain costs are low. Due to cost reduction and other considerations, domestic EPS Tier 1 suppliers are in high demand for domestic EPS motors comparable to the leading international level. According to intelligent research consulting data, the unit price of foreign brands is 10-15% higher than that of domestic brands, and domestic enterprises have mastered the core technology of EPS motors after years of technology accumulation. The company continued to break through in capital investment, technology, and customer development. In 2018, it entered the automotive motor field with high investment, covering well-known suppliers such as Nexteer and ZF. The fixed amount exceeded 2.3 billion yuan in 2023-2026, 4 new projects were added after the second half of 2023, and EPS motor business revenue increased rapidly. The 2023H1 reached 87.5 million yuan, +633.5% over the same period, which is expected to further contribute to the company's growth.
First coverage, giving a “buy” investment rating. We expect the company to achieve revenue of 27.64/35.96/4.496 billion yuan in 2023-2025, up 42.6%/30.1%/25.0% year on year, and net profit to mother of 3.44/3.87/442 billion yuan, up 15.2%/12.6%/14.1% year on year, respectively. Comparatively, the average PE of the company in 24 years is 24 times, and the company is 19 times. Corresponding to the current market value, there is room for an increase of 23%. For the first time, it was covered and given a “buy” rating.
Risk warning: the risk that overseas demand will continue to be sluggish, the risk that the auto parts business development will fall short of expectations, and the risk of exchange rate fluctuations.