Leading domestic automation equipment, focusing on the field of intelligent production solutions.

① The company is a leading enterprise in automation equipment, and the multi-dimensional layout creates a new growth point. The company is mainly engaged in R&D, production and sales of products such as automated equipment, automated flexible production lines, key automation components, and tooling jigs. The company continues to develop and innovate around key technologies and components, and has developed into a platform-based enterprise with rich underlying core technology and software and hardware counting modules. Its business targets consumer electronics, new energy, semiconductors, etc.

② The company's performance is steady, and the recovery in the 3C boom combined with the improvement in the profitability of new energy sources has driven the company's performance growth.

In 2016-2023, the company's revenue grew from 1.55 billion yuan to 4.84 billion yuan, with a CAGR of about 17.66%; due to the 3C boom and new business expansion, the company's net profit to mother fluctuated to a certain extent. In 2023, the company achieved a net profit of 0.39 billion yuan to mother, an increase of 17.80% over the previous year. As the profitability of the company's new energy business improves and the 3C boom increases, the company's performance is expected to grow steadily.

Fruit chain's prosperity is expected to improve, and MR equipment and flexible lines contribute new growth points ① Fruit Chain is expected to usher in a boom cycle, and the company will fully benefit. At WWDC 2024, Apple announced an official partnership with OpenAI to integrate ChatGPT into the ecosystem. The development of AI terminals is expected to bring about a new round of switching demand. At the same time, consumer electronics products are expected to innovate in computing power, heat dissipation, optics, etc., and bring a new round of 3C automation requirements, and fruit chains are expected to usher in a new boom cycle. The company is a core supplier of fruit chain equipment and is expected to benefit from the rise in fruit chain prosperity.

② MR devices contribute new growth points. Apple Vision Pro is Apple's first spatial computing device. It upgrades human interaction with computing devices from two-dimensional to three-dimensional, and is expected to open the era of spatial computing. The development of MR is driving the increase in demand for equipment. The company is one of the largest equipment suppliers in Apple's FATP segment. According to the company's 2023 annual report, the company has received prototyping requests from major customers for second-generation MR production equipment, and is currently in a state of prototyping. At the same time, the company has also received requests from many XR product customers, and the business is developing steadily.

③ Flexible lines benefit from major customers to reduce human demand. Flexible modular production lines have the characteristics of strong adaptability, high flexibility and high versatility. Driven by major customer demand to reduce personnel, the flexible line business is expected to continue to grow. According to the 2023 annual report, the company's flexible automated production line has been successfully mass-produced, and more than 40 production lines have been delivered to clients, which is progressing smoothly. At the same time, the company has received proofing requests from clients for flexible automated production lines for the next year, and is currently undergoing intense proofing.

The company's multi-dimensional layout creates a new growth curve.

① The long-term development trend of new energy sources has not changed, and the company focuses on core products and customers and is expected to continue to develop. The company's main new energy products include lithium battery equipment, charging and switching equipment, and automotive automation equipment. In 2023, China's NEV production and sales were 9.443 million vehicles and 9.495 million vehicles respectively, up 30.8% and 37.9% year-on-year, and the NEV market penetration rate reached 31.6%. In a situation where the industry is under pressure in the short term but the long-term trend remains unchanged, the company continues to track changes in mainstream processes, further focuses on core products+core customers, and is expected to achieve long-term development.

② There is plenty of room for domestic replacement of semiconductor equipment, and the company's continuous investment is progressing smoothly. According to MIR data, the total localization rate of sealing and testing equipment in mainland China was only 10% in 2021. Among them, the localization rate for patch machines and chipping machines was only 3%, and there is plenty of room for localization of semiconductor packaging and testing equipment. Advanced packaging is the development direction of the post-Moore era, and it is also an important way for the domestic semiconductor industry to break through. Driven by advanced packaging, progress in the localization of semiconductor packaging and testing equipment is expected to accelerate. The company focuses on market segments such as advanced packaging, optoelectronics, and AI computing power, continues to invest in R&D, and launches crystal fixing machines, AOI testing equipment, etc., and is currently progressing smoothly.

③ Develop a low-altitude economy and benefit from location advantages. Policies related to the low-altitude economy continue to be introduced. Driven by top-level design, the low-altitude economy is expected to flourish. Furthermore, the Suzhou Municipal Government issued the “Suzhou Low-Altitude Economy High-Quality Development Implementation Plan (2024-2026)”, which aims to promote the high-quality development of the low-altitude economy. The company's main product is an open space integrated global cruise information sharing system, which provides fully automatic drone inspection, etc. in various business scenarios, which can be used in emergency response, water affairs, environmental protection, public security and other fields. The company relies on its deep accumulation in intelligent manufacturing, robotics technology, etc., to lay out drone applications. According to Bozhong Seiko's WeChat account, the company has won the “First Batch of Low-Altitude Economy Leading Enterprises in Suzhou”.

Profit forecast. The company is a leading domestic automation equipment company. Improved profitability of the new energy business and increased consumer electronics boom have accelerated the company's development. We expect the company's revenue for 2024-2026 to be 5.171, 6.455, and 7.942 billion yuan, respectively, and net profit to mother 0.496, 0.661, and 0.776 billion yuan, respectively. The closing price on August 5 was 17.8, 13.4, and 11.4 times PE, respectively. Covered for the first time, a “gain” rating was given.

Risk warning. Risk that industry sentiment falls short of expectations; risk of new business development falling short of expectations; risk of increased market competition; risk of deviations in market space estimation; risk of untimely update of data quoted in reports, etc.