Investment Rating - The report maintains an "Overweight" rating for the environmental protection sector [2] Core Viewpoints - The iteration of the National VII emission standards is expected to expand the exhaust after-treatment market, with a projected market space of 100 billion yuan [3][7] - The National VII standards are accelerating, with significant advancements in technology routes, including EHC and tightly coupled SCR systems, which are anticipated to enhance product value [6][45] - Companies with leading technology and product competitiveness in the National VII industrial chain, such as Aikelan and Aofu Technology, are expected to benefit from this market expansion [3][10] Summary by Sections Emission Standards and Market Potential - Mobile sources are a significant contributor to air pollution in China, with motor vehicle emissions accounting for 72% of total emissions [4][12] - The National VII standards are currently in the third phase of pre-research, with the aim to further reduce NOx and particulate matter emissions [5][22] - The exhaust after-treatment market is projected to reach 100 billion yuan, driven by the transition from National VI to National VII standards [7][47] Technological Advancements - The National VII standards will likely introduce new technologies to improve NOx reduction and cold start control, enhancing the efficiency of exhaust after-treatment systems [6][45] - The use of EHC technology is expected to significantly improve SCR conversion efficiency, meeting stringent emission regulations [33][45] Recommended Companies - Aikelan (300816 CH) is recommended with a "Buy" rating, targeting a price of 48.40 yuan, due to its strong position in the National VII market and technological advancements [10][52] - Aofu Technology (688021 CH) is rated "Overweight," with a target price of 21.00 yuan, focusing on its development in the ceramic technology sector for air pollution control [10][52]

Core Viewpoint - Aikolan has transformed from a follower to a leader in the automotive emissions treatment industry, achieving significant growth and technological advancements since its establishment in 2009, culminating in its successful IPO in 2020 [3][5][10]. Company Overview - Aikolan was founded in 2009 by Liu Yi, who returned to China from the U.S. to address the technological monopoly in the automotive emissions sector [4]. - The company faced significant challenges in its early years, including five consecutive years of losses, but maintained its focus on R&D, which ultimately led to its success [4][5]. - Aikolan's revenue for the first half of 2023 reached 519 million yuan, with a net profit of 44.26 million yuan, marking a year-on-year growth of 23.82% [3]. Technological Advancements - Aikolan has developed key technologies such as three-way catalysts (TWC) and selective catalytic reduction (SCR), breaking the long-standing foreign monopoly in the emissions treatment market [5]. - The company holds 280 authorized patents and 47 software copyrights, with its SCR products recognized for their advanced technology [5][6]. Market Position and Strategy - Aikolan is strategically positioned to cater to commercial vehicles, non-road machinery, and shipping, where the transition to electric vehicles is slower, ensuring continued demand for its products [6][7]. - The rise of hybrid vehicles has opened new opportunities for Aikolan, which is actively developing exhaust treatment products for hybrid gasoline engines [7]. - The company is also involved in the national key R&D program for air and soil pollution control, focusing on next-generation emissions technologies [7][8]. International Expansion - Aikolan aims to balance short-term profitability with long-term transformation, actively pursuing international markets through acquisitions and partnerships [8]. - The company has established long-term collaborations with clients in Japan and is developing comprehensive product systems for European customers [8]. Talent Development - Aikolan emphasizes the importance of talent in driving long-term industry development, focusing on cultivating professionals with expertise in technology, low carbon solutions, and digitalization [9][10]. - The company collaborates with universities to develop a dual education mechanism, integrating real industry needs into academic training [9][10]. Future Outlook - Aikolan views the upcoming "National Seven" emissions standards as a new starting point for global leadership in the industry, aiming to contribute to both economic development and environmental sustainability [11].

Group 1 - The Yarlung Tsangpo River downstream hydropower project, with a total investment of 1.2 trillion yuan, is set to commence on July 19, 2025, and will take 10 years to complete, representing a significant infrastructure initiative that will drive demand across various sectors including construction machinery, cement materials, steel, and power grid equipment [1] - The project is expected to create substantial demand for engineering vehicles, particularly in high-altitude and low-temperature environments, which have stricter emissions requirements [1] - The estimated demand for engineering vehicles includes 2,000 units of wide-body trucks (90-ton class) and 1,000 units of engineering transport vehicles for earth and stone transfer, with a focus on meeting the National VI B emission standards [1] Group 2 - Kailong High-Tech (300912) is a leading company in the exhaust gas treatment industry, possessing full-chain capabilities in diesel engine exhaust treatment, which will benefit from the significant demand for exhaust treatment solutions due to the hydropower project [1] - Kailong High-Tech's National VI B technology is advanced, with its SCR system and urea injection control technology already certified for heavy trucks and engineering machinery [2] - Currently, Kailong High-Tech has a market capitalization of only 1.8 billion yuan and a low price-to-book ratio of over 3 times, indicating potential for growth as traditional oil vehicle demand rises due to large-scale infrastructure projects [2]