Investment Rating - The report initiates coverage with a "Buy" rating for Anfu Technology [6][7]. Core Insights - Anfu Technology has successfully acquired high-quality assets from Nanfu Battery, enhancing cash flow stability and profitability. The company is positioned for external expansion and has entered the domestic GPU sector through investments [6][7]. - Nanfu Battery, primarily focused on domestic alkaline battery sales, has shown strong ROE performance and is expected to maintain robust growth in revenue and profitability [6][7]. - The report highlights the strategic importance of Nanfu Battery's market position and its potential for growth in both domestic and international markets, driven by production capacity expansion and export initiatives [6][7]. Summary by Sections 1. Anfu Technology: Acquisition of High-Quality Assets - Anfu Technology, formerly known as Andeli Department Store, transitioned to focus on battery production after acquiring controlling interest in Nanfu Battery in 2022. The acquisition was structured to optimize financial performance and compliance, earning recognition in the Shanghai Stock Exchange's compilation of typical M&A cases [6][19]. - The company has plans to increase its stake in Nanfu Battery to 46% by 2025, which is expected to significantly boost its profitability [6][7]. 2. Nanfu Battery: Domestic Leader in Alkaline Batteries - Nanfu Battery has established itself as a leading brand in the domestic market, with a strong focus on alkaline batteries, which accounted for 77.3% of its revenue in 2024. The company has maintained a high ROE, with figures reaching 81.2% in 2024 [6][7]. - The company is expanding its production capacity, with plans to build four new production lines, which will enhance its competitiveness in the export market [6][7]. 3. Battery Industry: Steady Demand Growth - The report notes that the global market for zinc-manganese batteries is expected to grow steadily, with China's manufacturing capabilities leading the way. The domestic market for alkaline batteries is projected to increase as penetration rates improve [6][7]. - The report emphasizes the potential for export growth, with Nanfu Battery's export revenue expected to grow at a CAGR of 60.3% from 2022 to 2024 [6][7]. 4. Financial Forecast and Valuation Analysis - The financial projections indicate that Anfu Technology's net profit attributable to shareholders is expected to grow significantly, with estimates of 226 million, 405 million, and 440 million yuan for 2025, 2026, and 2027, respectively [6][7]. - The report suggests a target market capitalization of 14.2 billion yuan based on a comparable company average PE ratio of 35X, indicating a potential upside of 25% from current levels [6][7].

Investment Rating - The investment rating for the company is "Buy" [1][6]. Core Views - The report highlights that the dry battery industry has significant demand characteristics and growth potential, with Anfu Technology expected to increase its stake in Nanfu Battery to 43% by 2026, which will have a substantial positive impact on performance [2][13]. Financial Summary - Total revenue is projected to grow from 4,318 million yuan in 2023 to 5,822 million yuan in 2027, reflecting a compound annual growth rate (CAGR) of approximately 6.7% [4][19]. - Net profit attributable to the parent company is expected to rise from 116 million yuan in 2023 to 502 million yuan in 2027, with a notable increase of 131.3% in 2025 [4][19]. - Earnings per share (EPS) are forecasted to increase from 0.55 yuan in 2023 to 2.38 yuan in 2027 [4][19]. - The price-to-earnings (P/E) ratio is projected to decrease from 65.80 in 2023 to 15.18 in 2027 [4][19]. Business Segments - The alkaline battery segment is expected to generate revenues of 38.72 billion yuan in 2025, with a stable gross margin of 54% [17][19]. - The carbon battery segment is projected to achieve revenues of 3.80 billion yuan in 2025, maintaining a gross margin of around 37% [17][19]. - Other battery types, including button batteries and rechargeable lithium batteries, are anticipated to generate revenues of 2.20 billion yuan in 2025, with a gross margin of 58% [18][19]. Industry Overview - The dry battery industry is characterized by strong demand and significant growth potential, driven by trends such as the proliferation of smart home devices and the aging population [2][13]. - The global retail market for zinc-manganese batteries is expected to exceed 12 billion USD by 2025, with a steady growth rate of over 1% annually until 2028 [13][19]. Strategic Actions - Anfu Technology is undergoing a strategic transformation by increasing its control over Nanfu Battery, which has maintained a market share of over 85% in the domestic alkaline battery market for 32 consecutive years [13][19]. - The company is actively optimizing its shareholding structure to enhance operational efficiency and market competitiveness [23][29].