Investment Rating - The report initiates coverage with a "Buy" rating for the company, assigning a target price of 71.25 RMB per share based on a 40x PE valuation for 2025 [5]. Core Views - The company is positioned to benefit from the recovery of the automation cycle, expansion into new fields, and direct sales to major clients, which are seen as three driving forces for growth [3]. - The company holds leading market shares in small PLCs and servo systems, with a market share of 7.6% and 3.7% respectively, indicating a solid foundation for future growth [4]. - The automation market is expected to recover, with a slight positive growth of 2% in Q1 2025 after nine consecutive quarters of decline, driven by equipment updates and digital transformation policies [3][4]. Summary by Sections Basic Situation - The company has over 20 years of experience in the industrial automation field, focusing on PLC and servo systems, which form its core competitive advantage [14]. - The company has established a comprehensive product matrix covering PLCs, drive systems, human-machine interfaces, and smart devices, with PLCs and drive systems contributing over 80% of revenue [15][17]. - The domestic small PLC market was valued at approximately 7.86 billion RMB in 2024, with a recovery in demand expected in 2025 [31]. Growth Drivers - The company is expanding its product lines into medium and large PLCs and frequency converters, with expected sales growth of 40-50% in 2025 [5]. - The company has launched new products in humanoid robotics and is leveraging the Wuxi industrial cluster to accelerate industrialization [5]. - The company has deepened its direct sales strategy, with over 80 major clients established by the end of 2024, contributing to a revenue increase of 25.8% [61]. Profit Forecast and Valuation - The company is projected to achieve net profits of 280 million RMB, 348 million RMB, and 418 million RMB for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 22.5%, 24.4%, and 20.0% [5]. - The report highlights the company's strong market position and growth potential in the automation sector, particularly in the context of the recovery of the automation market and the expansion into new industries [5].

Group 1: Company Overview - The company operates two main business segments: automation and intelligence, and digitalization, which includes industrial internet, industrial software, and industrial AI software [2][4] - The product architecture consists of intelligent measurement and control devices, control systems, and industrial software, forming a complete product chain for various industries [4] Group 2: Market and Product Performance - The main products are Distributed Control Systems (DCS) and medium to large PLCs, primarily serving the energy, power, and chemical industries [5] - The DCS product line has seen rapid growth, with a market penetration rate of 43% for domestic DCS systems in the thermal power sector as of last year [5][6] - The potential market for PLCs in the steel industry is estimated at approximately 70 billion [5] Group 3: Industry Segmentation and Growth - The energy and power sector accounted for over 70% of the company's business last year, while the chemical sector contributed 16% [6][7] - The chemical sector experienced a decline in performance due to reduced industry capacity and lower market demand [7] - The steel sector has begun to see orders for PLCs, indicating a promising growth outlook [7] Group 4: Business Strategy and Future Plans - The company focuses on industrial automation, intelligence, and digitalization, with a growth strategy driven by domestic substitution policies [8][11] - Future market opportunities include the steel, cement, and water industries, with estimated market sizes of 70 billion, 8 billion, and 20 billion respectively [11] - The company aims to leverage its unique advantages in policy-driven domestic substitution and technological cost reduction to capture market share [11]

Group 1: Investor Relations Activities - The investor relations activities took place from May 19 to May 29, 2025, involving multiple sessions including on-site research and strategy meetings [5]. - A total of 16 participants from various investment firms attended the first on-site research session on May 19 [1]. - The activities included participation from 33 individuals in the third on-site research session and 73 individuals in the fourth session [2][3]. Group 2: Company Cost Advantages - The company maintains cost advantages over foreign brands primarily through low costs in R&D, marketing, and management [5]. - Compared to domestic brands, the company benefits from leading product design, scale effects in procurement and manufacturing, and effective quality control [5]. - The company employs rapid product iteration and optimization to enhance performance while reducing costs, ensuring stable gross margins despite competitive pressures [6]. Group 3: PLC and Industrial Robot Development - The company is increasing investment in medium to large PLC products, which are crucial for high-end applications in industries like photovoltaics and lithium batteries [7]. - The industrial robot business has seen significant growth due to a strong sales platform, extensive customer base, and continuous optimization of the regional sales network [8]. - The company plans to expand its industrial robot product series to meet diverse industry needs, with applications already established in sectors such as 3C, photovoltaics, and lithium batteries [9]. Group 4: Product Expansion and Market Opportunities - The company is actively expanding its product lines in automation, including pneumatic and guide rail products, to meet customer demands and explore new market opportunities [10]. - The elevator business is projected to grow steadily, focusing on expanding into multinational enterprises and enhancing service offerings in the aftermarket [11]. - The company aims to leverage its comprehensive elevator electrical solutions to capture market share among domestic and international clients [11].