Ousheng Electric: Leading in cleaning equipment, actively going overseas, entering a period of rapid growth. 1) Deeply cultivate wet and dry vacuum cleaners and small air compressors, and gradually expand the product line. The main products are wet and dry vacuum cleaners and small air compressors, which continue to account for more than 80% of revenue. In recent years, the company's product line has been expanded, and the company's products have gradually penetrated into nail guns, garden tools, nursing robots, etc. 2) Performance has entered a period of high growth, and I am optimistic about the company's rapid growth. According to the company's financial report, the company's revenue has increased for 3 consecutive quarters since 23Q4. 2024H1 revenue growth rate reached 55%, and net profit growth rate reached 47%; net profit to mother increased by 40%-55% year-on-year in the first three quarters of 2024. With the expansion of the company's product line and the recovery of demand in the North American market after interest rate cuts, we believe that the company's new growth cycle has arrived, and the main business will be the most important driver.

The tool industry has broad space, and the company is expected to benefit from interest rate cuts in the US market. 1) The power tools market space is broad, and the demand side will benefit from US interest rate cuts. According to the prospectus of Quanfeng Holdings, the global market space for power tools in 2025 is about 51.3 billion yuan. The recovery in demand comes from improvements in North American real estate after interest rate cuts. The transmission order of recovery is: hand tools - power tools - OPE, supported by inventory characteristics plus product characteristics. 2) Foreign power tool brands dominate, and the overall inventory pressure of downstream supermarkets is gradually declining. According to Quanfeng Holdings' prospectus, the top ten companies in the global power tool market in terms of revenue accounted for 73.3% of the market share in 2020, mainly Chuangke Industrial, Stanley Patek, and Bosch. Analyzing the inventory side of The Home Depot and Lowe's, supermarkets reached the peak of this round of inventory in mid-2022. Inventory has declined steadily in the last two years, and it is expected that orders will be actively placed in the future, which will benefit equipment vendors.

The comprehensive strength is strong, and product production capacity is growing in resonance. 1) Deeply bind major downstream customers and have a mature sales network. The company has established stable partnerships with dozens of internationally renowned retailers such as Walmart, Lowe's, The Home Depot, and Costco. In recent years, the revenue share of the company's top five downstream customers has basically stabilized at 60%-70%. Stable cooperation with major customers helps the company gradually increase its revenue center. 2) Stable market position, expansion of production capacity+expansion of categories drive growth. The company has a stable market position. Small air compressors are exported to North America, accounting for about 20% of domestic exports. On the production capacity side, production capacity in Malaysia is about to be implemented, and production capacity will go overseas to enhance the company's supply chain strength; on the category side, the company's business is gradually expanding from the main business to the upstream and downstream industrial chains, and nursing robots have a high ceiling. 3) The cash flow situation is good, and the dividend ratio continues to be high. The company's downstream customers are of high quality. The company's year-round net present ratio is greater than 1.0, and the 24H1 company's net present ratio is over 2.0. The company has maintained a high dividend ratio in recent years, and the basic dividend payment rate is around 80%. 2024H1's mid-term dividend reached 0.09 billion yuan, and the dividend payment rate exceeded 90%. Long-term steady cash flow and high dividends demonstrate value.

Profit forecasting and investment advice. The company has technical advantages and strong market expansion capabilities in the field of small air compressors and wet and dry vacuum cleaners, and has the ability to expand categories horizontally. The company's potential product care robots are also expected to accelerate growth. We expect the company's 2024-2026 revenue to be 1.83 billion, 2.56 billion and 3.43 billion yuan, respectively, with year-on-year growth rates of +50.3%, +40.2% and +33.9%, respectively; net profit to mother is expected to be 0.255 billion, 0.374 billion and 518 million yuan respectively, with year-on-year growth rates of +45.7%, +46.8% and +38.6%, respectively. The corresponding EPS was 1.39 yuan, 2.05 yuan, and 2.84 yuan, respectively, and the 2024/10/16 stock price was 24.22 yuan, and the corresponding PE was 17.4, 11.8, and 8.5 times. It was covered for the first time, giving it a “buy” rating.

Risk warning: Risk that demand recovery in the terminal market falls short of expectations, risk of exchange rate and freight fluctuations, geopolitical risks, etc.