(Report Producer/Analyst: Western Securities, Yang Jingmei, Hu Jinxin)
1. Self-lubricating bearing leader, product application covers multiple industries
1.1 The self-lubricating bearing business is making steady progress, and the products are widely used and the industry position is stable
The company is one of the most professional plain bearing manufacturers in the world. The company specializes in the research and development, production and sales of self-lubricating bearings, and its products are widely used in automobiles, construction machinery, port machinery, plastic machinery, agricultural machinery and other industries.
According to the different materials and production processes, the self-lubricating bearings operated by the company are divided into metal-plastic polymer self-lubricating wrapped bearings, bimetallic boundary lubricated wrapped bearings, metal-based self-lubricating bearings (including plane sliding bearings), copper-based boundary lubricated wrapped bearings, non-metallic self-lubricating bearings (such as filament wound bearings, engineering plastic bearings, powder metallurgy bearings) and other bearings (such as spherical bearings, etc.), with rich product specifications.
Metal-plastic polymer self-lubricating rolled bearings, bimetallic boundary lubricated wrapped bearings, and metal-based self-lubricating bearings are the company's main sources of revenue, accounting for 29.66%, 18.60% and 19.47% of the revenue of the three types of bearings in 2023H1, respectively.
1.2 Deeply cultivated in the industry for more than 20 years, committed to becoming a global strategic partner of sliding bearing technology
The company has been deeply involved in the industry for many years and is committed to becoming a global strategic partner of sliding bearing technology. Founded in 1995, the company has been deeply involved in the industry for more than 20 years, and in 2017, the company was successfully listed on the GEM of the Shenzhen Stock Exchange, and gradually grew into a leader in the localization of self-lubricating bearings.
The company pays attention to overseas market development, and its development of solid inlaid self-lubricating bearings in 1997 started overseas market exploration, and in 2006, friction welding entered the global supply chain of Carter. At present, the company's products are exported to more than 30 countries and regions such as Europe, America and Japan, and continue to develop overseas markets. In 2008, the company established a provincial self-lubricating material R&D center, in 2010, Changsheng Technology was established to launch high-performance resin swash plates for air conditioning compressors, and in 2015, the company successfully developed self-lubricating bearings for nuclear power and reached the international advanced level through appraisal in 2016. Based on the accumulation of technology and market share, the company is currently committed to becoming a global strategic partner of sliding bearing technology.
1.3 The shareholding structure is concentrated, and the equity incentive strengthens the core management of the company
The company's equity is concentrated, and the actual controller Sun Zhihua and his concerted actors hold more than half of the shares together. As of September 30, 2023, Sun Zhihua, the actual controller and chairman of the company, holds 31.87% of the shares, and Sun Weiqing (the daughter of Sun Zhihua), Chu Chenjian, and Jiashan Parkson Investment Management Partnership (Limited Partnership) are Sun Zhihua's concerted actors, with a total of 52.83% of the shares, and the shareholding structure is relatively concentrated.
The company's core management holds shares and the management team has rich experience. Except for Sun Weiqing, the individual shareholders of the top ten shareholders of the company are all senior executives of the company, and the interests of the company are closely connected with the interests of the core management. Chairman Sun Zhihua has been engaged in the research and development, production and operation of self-lubricating bearings since the early 80s of the 20th century, and has been deeply involved in the industry and has rich experience in corporate strategic planning and management.
The company's management team members are senior professionals in technology, research and development, marketing, production, management, etc., after years of exploration and running-in, the team has condensed into a knowledge structure and professional structure configuration reasonable, market operation experience, sincere cooperation of the practical management team.
The company makes good use of the equity incentive plan and improves the company's long-term incentive mechanism. In 2021 and 2022, the company implemented equity incentive plans to improve the company's long-term incentive mechanism and effectively mobilize the enthusiasm of the company's employees. In 2022, the stock incentive targets are the company's middle-level managers, core technical backbones and business backbones, and the performance assessment target is that the company's operating income from 2022 to 2024 will not be less than 1 billion yuan, 1.25 billion yuan and 1.56 billion yuan respectively.
Second, the company's performance is excellent, and the wind power industry has opened up space for future growth
2.1 Revenue maintained growth, and the net profit attributable to the parent company grew at a strong year-on-year rate
From 23Q1 to Q3, the company's revenue maintained a growth trend, and the net profit attributable to the parent company maintained a year-on-year growth.
From 2018 to 2023Q1-Q3, the company's operating income was 6.63/6.01/6.55/9.85/10.71/819 million yuan respectively, with a CAGR of 12.77% from 2018 to 2022, and the company's net profit attributable to the parent company was 1.47/1.28/1.45/1.55/1.02/179 million yuan respectively, and the CAGR of net profit attributable to the parent company from 2018 to 2022 was -8.77%.
In the first three quarters of 2023, the company's product structure has been optimized, the proportion of high gross margin products has increased, the net profit attributable to the parent company was +36.79% year-on-year, and the net profit attributable to the parent company was +55.54% year-on-year.
The company's self-lubricating bearing business accounts for a high proportion of operating income, and together with the high-performance polymer business that has been gradually expanding since 2021, it constitutes the main source of the company's revenue.
Bearings are widely used in high-end equipment in key areas such as energy power generation, industrial drive, petrochemical industry and ships, the rapid development of the wind power industry, at the same time, the trend of large-scale wind turbines is obvious, considering the applicability of the scene and the sliding shaft can bring the fan cost reduction, the gearbox and other positions of the sliding bearing to replace the rolling bearing use potential, the company as a self-lubricating bearing leading enterprise is expected to benefit, to achieve performance volume.
2.2 Product structure adjustment boosted gross profit margin and net profit margin growth
The price of raw materials declined, and the adjustment of product structure helped the gross profit margin and net profit margin to recover. From 2018 to 2023Q1-Q3, the gross profit margin was 36.16%/36.97%/35.82%/27.66%/29.38%/36.24%, respectively, and a year-on-year increase of -1.56/+0.81/-1.15/-8.16/+1.72/+8.4pct.
In 2022, Chengdu Cen Hongtong, a partnership enterprise invested by the company and other enterprises, operated abnormally, and the company adjusted the fair value of the company to zero and recognized the fair value change loss, resulting in a decrease of 100 million yuan in the company's net income from fair value change in 2022. Since 2023, the company has comprehensively used price adjustment and product structure adjustment to move the pressure on the cost side to the downstream industry, and the company's net profit margin and gross profit margin have rebounded.
2.3 The company's expense ratio is relatively stable, and the expense side is well managed
The company's expense rates are relatively stable, and the expense side is well managed. 2023Q1-Q3 sales/management/R&D/financial expense ratios were 1.82%/6.15%/4.80%/-0.62%, respectively, a year-on-year increase of -0.07pct/+0.32pct/-0.23pct/+0.25pct.
23Q1-Q3 financial expenses -5.1048 million yuan, a year-on-year increase of +61.82%, mainly due to the increase in foreign currency exchange rates and the corresponding increase in foreign exchange income.
3. The application scenarios of the sliding shaft are broad, and the wind power is "sliding and rolling".
3.1 Bearings can be used in multiple scenarios, which can be divided into rolling bearings and sliding bearings
3.1.1 Bearings are widely used in all kinds of machinery and equipment, and the downstream demand is extensive
Bearing applications cover almost all industrial sectors. Bearing manufacturing is a large volume of high-end equipment parts market in the mainland, for the industrial chain, the upstream of the bearing manufacturing industry includes bearing steel-based raw materials and production equipment suppliers.
The middle reaches of the industrial chain are mainly bearing manufacturing, and bearing manufacturers will purchase some bearing parts including inner and outer rings, rolling elements, fixing frames, seals, etc. The downstream application fields mainly include the automotive industry, heavy machinery industry, home appliance and motor industry, construction machinery industry, etc. In general, the bearing manufacturing industry chain covers a wide range of fields.
3.1.2 Bearings can be divided into rolling bearings and sliding bearings, and sliding shafts have a number of advantages
Rolling bearings contain rolling elements that rely on the rolling elements to rotate and support the rotating shaft. The contact point is a point, and the contact point is positively correlated with the number of rolling elements. Due to its small friction coefficient, excellent transmission performance and mechanical properties, it is widely used in high-speed mechanical equipment. At present, Continental's rolling bearing products have reached the level of standardization, serialization and generalization, and have the conditions for large-scale production and supply.
Plain bearings contain no rolling elements and rely on smooth surfaces to support the rotating shaft. The contact part is the surface, and at the same volume, the plain bearing with surface contact is much larger than the rolling bearing with point contact. Sliding bearings are characterized by small size, large bearing capacity, small vibration and noise, and many structural changes, which are more used in occasions with large bearing load, compact structure, high precision and no vibration. Its main matrix is a copper alloy with high strength, good wear resistance and corrosion resistance, and has good working performance under medium speed, high turbidity and high impact load.
3.1.3 Classification of sliding bearings: fluid sliding bearings and self-lubricating bearings
There are various types of sliding bearings, which are divided into fluid lubricated bearings and self-lubricating bearings according to the presence or absence of lubricant medium.
Fluid-lubricated bearings use oils, greases, etc., to reduce friction. In fluid lubrication, there are two types of liquid lubrication and gas lubrication according to the form of lubricating medium, and can be divided into dynamic lubrication and hydrostatic lubrication according to the lubrication mechanism. The hydrodynamic oil film sliding bearings in the hydrodynamic sliding bearings belong to the middle and high-end sliding bearings, which mainly rely on the hydrodynamic pressure brought by the rotation of the journal to form a suitable pressure oil film to separate the bearing and the journal surface, so that the metal and the metal do not have direct contact.
Self-lubricating bearings can work without lubricant or for a long time. Self-lubricating bearings refer to sliding bearings made of self-lubricating materials or pre-added lubricants to the materials, which can be used without lubricant or without lubricant for a long time. Based on the different lubrication mechanisms, self-lubricating bearings usually include non-fully liquid-lubricated bearings (such as oil-impregnated bearings) and solid-lubricated bearings. Among them, the metal + non-metallic solid bonded bearing (the main product of Changsheng bearing) in solid lubricating bearings can form a permanent solid lubricating film, without or reducing oiling.
The main advantages of hydrodynamic lubrication bearings are high rotation accuracy and low frictional power consumption, which are more convenient and economical bearings. The oil and grease lubricants in the fluid lubrication bearings play a role in mitigating vibration and shock while lubricating, and in general, it is only necessary to overcome the frictional power consumption caused by the viscosity of the fluid, and the frictional power consumption is small while ensuring high rotation accuracy. At a certain speed, the rotational capacity of the fluidly lubricated bearing increases with the increase of speed. However, the noise and maintenance required during movement are slightly higher than those of self-lubricating bearings.
The self-lubricating bearing has good performance under extreme working conditions, and has the characteristics of lubrication-free, impact resistance, dust resistance, and high strength. The rolling elements, inner and outer ring raceways or cages of self-lubricating bearings are treated with special materials, and do not need to add oil or grease lubricants to work normally, running smoothly and with low noise, especially suitable for low speed, heavy load and harsh working conditions.
3.2 The downstream demand is increasing rapidly, and the sliding bearing market has a broad space
The global plain bearing market has great potential. With the development of downstream industries such as marine engineering, energy, petrochemical industry, and transportation, a large number of machinery and equipment have gradually become large-scale and heavy-loaded, and the demand for sliding bearings has increased rapidly, promoting the rapid development of the sliding shaft industry. According to Precedence Research, the global sliding bearing market is expected to grow from US$8.7 billion in 2016 to US$16.8 billion in 2022, with a compound annual growth rate of 9.98%.
The domestic slip shaft industry is developing rapidly. The sliding shaft industry in China is in a stage of rapid development, and there are currently more than 200 sliding bearing manufacturers in China, but the scale, technical level and product quality of the enterprises are uneven. Since 2020, with the rapid development of the mainland's manufacturing industry and the recovery of foreign demand, the demand for sliding bearings has grown rapidly, and the overall situation of the industry has continued to improve, and the scale of China's sliding shaft market is expected to exceed 16.25 billion yuan in 2022.
3.3 Overseas enterprises have a high market share of self-lubricating bearings, and the products of domestic enterprises are gradually optimized
The self-lubricating bearing head is still dominated by overseas enterprises, and domestic enterprises are gradually increasing the volume.
Looking at the global sliding bearing industry, the sliding shaft industry in developed countries in Europe and the United States started earlier, with rich historical accumulation, and has a leading edge in technological breakthroughs and market share.
For the branch of the self-lubricating bearing industry, overseas companies have a certain market share advantage, and companies such as GGB Company of the United States, DaidoMetal Company of Japan, and OILES Company of Japan dominate the global market.
At present, the self-lubricating bearing enterprises in the mainland are mainly concentrated in Zhejiang, Jilin, Liaoning, Beijing and other places, of which Zhejiang Jiashan is the most important production base in the mainland, and the output value of self-lubricating bearings in the region accounts for more than 70% of the national GDP.
By strengthening quality management, increasing R&D investment, improving production efficiency, etc., Changsheng Bearing, Shuangfei Bearing, Zhongda Bearing and other enterprises have gradually highlighted their competitive advantages in product prices and some technical indicators, and their products have been exported to many countries, forming a pattern of common competition between domestic and foreign enterprises.
According to data from Huajing Industry Research Institute and QYResearch, in 2021, the market share of self-lubricating bearings of Daido Metal, OILES, GGB, Changsheng Bearing, and Shuangfei Co., Ltd. will be 17.3%/10.0%/5.8%/3.0%/2.7% respectively.
3.4 Self-lubricating bearings can be used in many industries, and the market space for wind power gearbox "slip and roll" is broad
The advantages of operation in extreme environments are obvious, and self-lubricating bearings are widely used. As the basic parts of machinery, self-lubricating bearings have the characteristics of maintenance-free, low-cost, corrosion-resistant, etc., and have obvious advantages in operation under heavy load, low speed and harsh working conditions, and the application fields mainly include automobiles, construction machinery, port machinery, plastic machinery, agricultural machinery, hydraulic components, forging machinery, textile machinery, office equipment, etc.
3.4.1 Wind power industry: rapid development, "slippery and rolling" trend is obvious
It is estimated that about 28 bearings will be used for the whole wind turbine, and the use of plain bearings in the gearbox will reduce costs. The fan mainly includes doubly-fed, semi-direct-drive and direct-drive three technical routes, of which the doubly-fed and semi-direct-drive fan uses a gearbox, and the overall fan bearing is generally composed of 1-2 sets of spindle bearings, 3 sets of pitch bearings, 1 set of yaw bearings, a set of gearbox bearings (about 20) and 2 sets of generator bearings, and the direct-drive fan reduces the use of gearbox bearings compared with the former.
Plain bearings are expected to be the first to replace gearboxes. At present, some domestic bearing enterprises have mature applications in industrial gearboxes, with deep technology accumulation, and the development of gearbox bearings has more advantages than bearings in other aspects of fans.
According to the "Application Status and Development Trend of Sliding Bearings in Wind Power Gearboxes", compared with wind power gearboxes using rolling bearings, the torque density of wind power gearboxes using sliding bearings can be increased by 25%, the transmission chain length can be reduced by 5%, the weight of the gearbox can be reduced by 5%, and the cost can be reduced by 15%.
As early as 2013, the German Winergy company has realized the development of 8MW sliding bearing wind power gearbox. As the domestic wind power industry owners have an increasingly strong demand for cost reduction, the penetration rate of gearbox sliding shaft products with application experience and development advantages is expected to increase rapidly, and companies such as Envision Energy and Goldwind Technology are currently actively deploying.
The gearbox sliding shaft market space is expected to further expand. Wind turbine gearbox is the key component of transmission megawatt power in doubly-fed and semi-direct-drive wind turbines, gearbox bearings are used in more than 20 sets of fans, because direct-drive fans reduce the use of gearboxes and gearbox bearings compared with doubly-fed and semi-direct-drive fans, with the iterative trend of onshore wind turbines from semi-direct drive to doubly-fed and offshore wind turbines from direct drive to semi-direct drive in the future, the amount of gearbox sliding shafts will continue to increase, the penetration rate of sliding shafts is expected to increase, and the market space will be further expanded.
It is expected that the installation of offshore wind power will continue to accelerate in the future. In 2023, Jiangsu, Guangdong and other places will be affected by factors such as waterway problems, and the new installed capacity of Haifeng will be lower than expected. Recently, the sea breeze project has been progressing smoothly, with the 500MW sea breeze project on Sanshan Island in Yangjiang, Guangdong Province launching the preliminary bidding, the 850MW sea breeze project in Jiangsu Guoxin Dafeng being approved, and the sea breeze projects in Fujian, Shandong, Zhejiang, Guangxi, Liaoning and other places are all in progress. We expect that the new installed capacity of domestic offshore wind power is expected to reach 10/16GW in 24-25, a year-on-year increase of +100%/60%, and the domestic installed capacity of offshore wind is expected to usher in rapid growth.
It is expected that the installed capacity and bidding of the wind power industry will maintain a high degree of prosperity, and the wind power sliding bearing market is expected to be released. We expect that in 23-25 years, the new domestic onshore wind power capacity will be 55/61/67GW, and the new offshore wind power capacity will be 5/10/16GW, respectively. Assuming that the average power of onshore and sea wind turbines in 23 years is 6/9MW, the corresponding number of wind turbines in 23 years is 9167/556 respectively.
The value of onshore and offshore gearbox bearings is 15/300,000 yuan per set, and the sliding penetration rate of onshore/offshore gearbox bearings in 23 years is 5%/15% respectively, and it is expected that the gearbox market space will reach 94 million yuan in 2023. With the further expansion of onshore and offshore wind turbine capacity, it is expected that the price of wind turbine gearbox sliding shafts will further increase, and the penetration rate will increase simultaneously. In addition, the sliding shaft is also expected to be used in the wind power spindle. It is estimated that by 2025, the wind power bearing market space will reach a total of 1.975 billion yuan, and the market space CAGR of wind turbine slide shaft will reach 358% from 2023 to 2025.
The company will raise funds to support the wind power sliding shaft project, and product testing is being carried out in an orderly manner.
In terms of capacity raising and investment, the company plans to invest 130 million yuan in a new project with an annual output of 14,000 sets of self-lubricating bearings for wind power generation in the private placement plan disclosed on September 30, 2022.
In terms of downstream sample delivery, according to the company's performance briefing on September 5, 2023, the company's product testing is being carried out in an orderly manner, the products applied to the small megawatt doubly-fed model have been tested, and the products applied to the large megawatt semi-direct drive model are in the process of testing. At the same time, the company and several other gearbox factory customers are carrying out related internal testing work.
3.4.2 Automotive industry: Self-lubricating bearings are accelerating their penetration into the automotive industry
With the advantages of light weight, low noise and no oil feeding, self-lubricating bearings have accelerated their penetration into the automotive industry. The number of self-lubricating bearings has increased, and the number of self-lubricating bearings on each passenger car has exceeded 100 pieces, and it is constantly replacing needle rollers and powder bearings and generating new applications. The use of self-lubricating technology in non-bearing fields is also increasing, such as self-lubricating coated swash plates for air conditioning compressors, polymer engineering plastic structural parts with self-lubricating properties, etc.
The company's self-lubricating bearings and high-performance polymer materials not only meet the functional requirements, but also meet the requirements of the automotive industry for environmental protection, such as ROHS, Reach and other standards, mainly used in gearboxes, seats, axles, hinges, engines, steering systems, shock absorbers and other parts.
The overall sales volume of the automobile industry has picked up, and the demand for new energy vehicles has grown rapidly. According to the data released by the China Association of Automobile Manufacturers, the sales volume of automobiles in mainland China will reach 26.864 million units in 2022, a year-on-year increase of 2.24% over 2021. Among them, the sales of passenger cars reached 23.563 million, a year-on-year increase of 9.69%. New energy vehicles have developed rapidly in the past two years, ranking first in the world for 8 consecutive years, with sales increasing from 507,000 units in 2016 to 6.887 million units in 2022, with a CAGR of 54.47% from 2016 to 2022. Among them, the sales volume in 2022 will increase by 95.60% year-on-year, and the market share will increase to 25.6%, which further shows that the new energy vehicle market has shifted from policy-driven to market-driven.
The company's market share of slip shafts in the global automotive industry is expected to increase. According to data from Marklines and the China Association of Automobile Manufacturers, the global sales of electric vehicles/hybrid vehicles and fuel vehicles in 2022 will be about 1065/68.75 million units, respectively. Assuming that the value of sliding bearings for electric vehicles/hybrid vehicles and fuel vehicles is 250/200 yuan respectively, the global automotive slip shaft market space in 2022 will be about 16.4 billion yuan. Assuming that the downstream application of the company's metal-plastic polymer self-lubricating rolled bearings in the same year is the automotive industry, the company's automotive industry slip shaft revenue in 2022 will be about 335 million yuan, corresponding to a global automotive slip shaft market share of about 2.04%. With the increase in the penetration rate of new energy vehicles in the future, and the demand value of new energy sliding axles is expected to continue to increase, the global automotive sliding shaft market space is expected to reach 20 billion yuan by 2025, and the company's automotive sliding shaft market share has broad room for improvement.
The company gives full play to the advantages of R&D and design, and jointly designs and develops new products and new materials with customers. From design, material selection to production, it is difficult for self-lubricating bearings to achieve standardization in all aspects from downstream customer needs.
When choosing suppliers, well-known customers attach great importance to the comprehensive strength of the enterprise, and require suppliers to have strong R&D capabilities to ensure continuous improvement and updating of products. Therefore, the company attaches great importance to the development of customized products according to customer needs.
In the fields of automotive seat systems, car doors, hoods, back box twists, gearboxes, automotive shock absorber systems, engine peripheral supporting systems, etc., the company designs and develops new products and new materials with customers according to customer application data and its own test data, and promotes the company's self-lubricating bearing products to BMW, Volvo, Jaguar, Tesla, Audi, Volkswagen and other models.
In the application fields of automobile brake system, air conditioning compressor and other applications, the company gives full play to the advantages of R&D and design in self-lubricating materials, and cooperates with well-known enterprises such as Knorr-Bremse, Meritor, and Huayu Sanden in the application and test of self-lubricating new materials.
The company's customer resources are high-quality and stable, and its products have been recognized by users around the world.
In terms of customer resources, the company has entered the global supply system of Volvo, Kobelco, Hyundai, Tata Motors and other well-known OEMs, and has established long-term and stable cooperative relations with well-known domestic and foreign automobile and parts manufacturers such as Meritor, Bosch, Knorr-Bremse, Faurecia, Berk, South Korea's Mando, Mitsubishi Technology, FAW East Machinery Co., Ltd., etc., and has been awarded the "Excellent Project Management Award by Konorr in Germany". Tenneco awarded the Outstanding Contribution Award for Shock Absorption System, the "Outstanding Supplier of the Year" award and other honors.
3.4.3 Construction machinery: self-lubricating bearings are the key components of transportation equipment
With the advantages of impact resistance, dust resistance and high strength, self-lubricating bearings are mainly used in key components of transportation equipment such as excavators, pavers, sorting machines, concrete machines and forklifts.
In order to ensure reliable operation under high-intensity working conditions, bearings play a very important role in construction machinery. Compared with traditional bearings, self-lubricating bearings have the advantages of impact resistance, dust resistance and high strength, which solves the lubrication problem, reduces noise and prolongs the service life, especially suitable for equipment in harsh mines and field operations, mainly used in excavators, pavers, sorting machines, concrete machines and forklifts of construction machinery, and other transportation equipment, specifically used in buckets, connecting rods, small arms, large arms, cylinders, connecting pins, hydraulic systems, carrier pulleys, rollers, idlers and other key components.
The operating income of the construction machinery industry generally showed a growth trend. Benefiting from the country's increased investment in infrastructure construction, the construction machinery industry has generally shown a growth trend from 2016 to 2022. The operating income of the whole industry increased from 479.5 billion yuan in 2016 to 849 billion yuan in 2022, with a CAGR of 9.99% from 2016 to 2022. Among them, affected by factors such as the slowdown in macroeconomic growth, the recurrence of the new crown epidemic, and the insufficient effective operating rate of the project, the domestic construction machinery industry will be in a downward adjustment period in 2022, the domestic construction machinery market demand will be greatly reduced, and the operating income of the whole industry will decrease by 6.34% year-on-year.
Excavators are expected to start a new cycle in 24-25 years. Since excavators are the most widely used in the construction machinery industry, the sales volume of excavators can usually reflect the prosperity of the construction machinery industry. According to Wind data, from January to November 2023, the cumulative sales of excavators in China were 178,000 units, a year-on-year decrease of 27.1%.
Looking back at the historical excavator sales, we can find that the construction machinery industry has a certain periodicity. Taking 2008 to 2015 as an example, the construction machinery industry experienced a relatively complete 8-year cycle and bottomed out in 2015. Since 2016, we believe that the current round of the cycle opened, peaked in 2020 and then opened a downward cycle in 2021, considering the historical situation and the service life of excavators is generally about 8 years, a trillion yuan of new national bonds are also expected to promote the recovery of the construction machinery industry, we expect that domestic excavator sales are expected to bottom out in 2024 to 2025, opening a new round of excavator update cycle.
Participate in the design and optimization of the model, and build a long-term cooperative relationship. Construction machinery parts supply chain relationship is characterized by high entry threshold, long certification time, strong stability, once become a qualified supplier of the vehicle or the whole machine manufacturer, to achieve batch supply, the two sides will form a more stable long-term cooperative relationship, customer resources are not easy to lose.
In terms of construction machinery applications, the company has been directly connected with Caterpillar, Jessiebot, Volvo, etc., or through its first-tier suppliers to participate in the optimization of various models and the design of new models, and in the company to carry out special aircraft tests.
Since 2019, the company has formed a strategic partnership with Sany Group, and the company has participated in the design and testing of self-lubricating bearing components in its chassis parts factory.
After years of development, the company has entered the global supply system of well-known OEMs such as Caterpillar, Liebherr, Putzmeister, Jessie, Hitachi Construction Machinery, Komatsu, etc., and has established long-term and stable cooperative relations with well-known construction machinery and parts manufacturers at home and abroad, such as South Korea HK, Sany Group, Zhenhua Heavy Industries, Hengli Hydraulics, etc., and has been awarded the honors of "Caterpillar Excellent Supplier" and "Hitachi Construction Machinery Awarded Quality Management System Class A Certification" by customers. With the construction machinery industry bottoming out, the company's performance is expected to benefit.
3.5 The company has a strong foundation for technology research and development, and the leading enterprises have significant advantages
3.5.1 Master a number of core technologies, independent research and development advantages are significant
He has a profound R&D background and has mastered a number of industry-leading core technologies. Through years of R&D accumulation, the company has formed more than 10 industry-leading core technologies, such as material formula preparation process, metal-based material surface composite technology, automatic tape and reel material production line and back-end automatic molding processing equipment and process technology, and self-lubricating bearing material testing and testing technology.
As of December 31, 2022, the company has 90 valid authorized patents, including 6 international invention patents, 24 domestic invention patents, and 3 published papers.
It has mature self-lubricating bearing production technology, and a number of products have been recognized at the provincial and national levels.
The company's CSB-850S steel-based nickel alloy self-lubricating bearings, MJF-800 bimetallic friction welding tape flange bushings have been identified as national key new products, CSB-650HN self-lubricating ball hinges for steam generator support, CSB-50YD special bearings for automobile seat motors, CSB-250HN self-lubricating plates for reactor pressure vessel bearings, CSB-J20 special bearings for automobile air compressors, CSB-200Q high-performance boundary lubricated steel sleeves, 75 items such as CSB-650HD self-lubricating radial spherical bearings for voltage regulator support rods have been identified as provincial industrial new products, high-tech products or passed provincial acceptance.
3.5.2 Targeted early research and development to quickly match customer needs
With years of technology accumulation and product development practice, the company has the ability to carry out synchronous development for domestic and foreign OEMs. Through mutual visits with well-known OEMs or supporting manufacturers at home and abroad, the company captures the development trend of products and technologies of major OEMs, conducts targeted early research and development on key and common problems in the industry, and grasps the development trend of technology, so as to quickly match customer needs when new projects and new platforms are launched. For example, in terms of the application of new materials, the company and well-known domestic port machinery manufacturers have successfully developed metal-based self-lubricating bearings based on steel-poured copper, which replaces the all-copper products used by the customer, which not only saves a lot of material costs, but also greatly improves the performance.
3.5.3 The company has a high degree of brand recognition and exports overseas and expands globally
A number of national and provincial recognition, brand awareness and influence are high. It has established its own brand system, with 7 domestic trademarks, 2 international trademarks (Madrid and Turkey), and 5 products with the word mark, and has high brand awareness and influence in the self-lubricating bearing industry at home and abroad. "Changsheng (bearing)" enterprise name was identified as a well-known trade name in Zhejiang Province, "CSB (Changsheng) brand sliding bearing" was identified as a famous brand product in Zhejiang Province, Changsheng and CSB trademark was identified as a famous trademark in Zhejiang Province, CSB was recognized as a famous export brand in Zhejiang Province by the Department of Commerce of Zhejiang Province, and the products are sold to China, Europe, Japan, South Korea, North America and other countries and regions around the world, enjoying high brand awareness and reputation in the domestic and foreign markets.
The company's overseas revenue has grown rapidly, and its products are exported to many countries. The company's overseas operating income accounted for a relatively high proportion and grew rapidly, accounting for 43.05% in 2022, and overseas revenue increased from 350 million yuan in 2018 to 461 million yuan in 2022, with a CAGR of 7.13% from 2018 to 2022. Among them, the company's export customers cover the United Kingdom, Germany, France, Italy, Sweden, South Korea, Japan, India, North America and other countries and regions, and the decentralized regional distribution reduces the business risk caused by the fluctuation of the automobile and construction machinery market in a certain region, so that the company is in a more favorable position in the future competition.
The company has a wide range of export customers, and attaches equal importance to direct sales and distribution in foreign markets. From the perspective of sales model, the company adopts a sales model based on direct sales and supplemented by distribution, and the distribution is buyout sales. Among them, overseas direct sales customers mainly include South Korea HK, South Korea SCL, Italy ITM, Caterpillar, Italy SABI, Berke, etc., and the distribution customers mainly include the United Kingdom KRF, Germany CSB, France CSB, Sweden D&E, Turkey O-PAK, India CSB, etc.
Fourth, the sliding shaft is expected to be applied in many parts of the humanoid robot, and the ball screw is cut to open up the growth space
4.1 Humanoid robots have been developed for nearly half a century, and the market space is broad
Humanoid robots started in the 70s of the 20th century, and the technology continues to iterate. Humanoid robots refer to robots with human form and functions, and their development is mainly divided into four stages:
1) Preliminary walking stage: represented by WABOT-1 built by Waseda University in Japan;
2) Ability ice-breaking stage: the era of highly integrated systems represented by Honda's humanoid robots;
3) Technological breakthrough stage: characterized by strong compound athletic ability, the prominent representative is Boston Dynamics Atlas;
4) Industrialization landing stage: The fourth stage is represented by the Tesla Optimus robot, which is still in the early stage of development. In general, humanoid robots have undergone an iterative process from slow static motion to continuous dynamic motion to high dynamic performance, moving towards a high degree of integration, environmental perception, free movement, fine operation, and industrial quantification.
With the empowerment of science and technology, humanoid robots are expected to become an ideal carrier of "embodied intelligence".
Embodied intelligence refers to the ability of an intelligent system or machine to interact with the environment in real-time through perception and interaction. With the overall rapid breakthrough of global high-tech, especially in the field of AI, the large model represented by ChatGPT will further optimize the control technology of humanoid robots, equip humanoid robots with "brains", make them interact with the outside world smoothly, and increase "decision-making" capabilities such as task understanding, splitting and logical reasoning, so that humanoid robots are expected to become the ideal form of "embodied intelligence".
The humanoid robot market is broad, and it is expected that the global new market space CAGR will reach 236% in 23-30 years.
Due to the differences in the technical routes of humanoid robots of various manufacturers, and the price and quantity of the components used, we assume that the average value of a single humanoid robot in 23 years is 700,000 yuan. Although humanoid robots are currently more expensive and sales have not yet been increased, considering that there is a certain amount of trials of robots in agriculture, manufacturing and other industries, it is expected that the new market space for global humanoid robots will be about 900 million yuan in 23 years. Taking into account factors such as the price reduction after the mass production of robots, the new market space for global humanoid robots is expected to reach 1,209.5 billion yuan by 2030, and the CAGR of the new market space in 23-30 years is about 236%.
4.2 Humanoid robot bearings are in great demand, and the application space is "promising"
Bearings are required for many parts such as joints and reducers of humanoid robots.
Humanoid robots require multiple bearings to achieve joint flexibility and accurate movement, ensuring that the various parts of the robot can work together effectively to complete a given task or action.
Bearings in humanoid robots are often used to connect and support the various parts of the robot, such as arms, legs, joints, etc., to ensure that they can move and rotate freely.
In the design of the humanoid robot Optimus actuator announced by Tesla 2022 AI DAY, various types of bearings such as deep groove ball bearings, four-point contact bearings, angular contact bearings, crossed roller bearings, and flexible bearings are used, which are mainly distributed in actuator joint connections, reducers, motors and related supporting uses.
Bearings are used in the reducer and joint connection of rotary joint actuators, and a total of 14 angular contact bearings, 12 crossed roller bearings, 10 flexible bearings, 12 needle roller bearings and 12 tapered bearings are expected to be used in the rotating joint actuator of humanoid robots. In terms of reducer applications, bearings are widely used in the gear support parts and other rotating parts of rotary joint reducers to support and maintain the smooth operation of various gears and rotating parts.
Let's assume that the humanoid robot needs to use 10 harmonic reducers and 2 RV reducers, each harmonic reducer needs 1 flexible bearing, and each RV reducer needs 6 needle roller bearings, 6 tapered bearings and 1 angular contact bearing. In addition, in the joint actuator, each rotary joint needs to use an angular contact bearing that can withstand axial and radial forces at high speeds, and a crossed roller bearing that can be used with the output end of the harmonic reducer.
Bearings are used in the joint connection of linear joint actuators, and humanoid robot linear joint actuators are expected to use 14 deep groove ball bearings and 14 four-point contact bearings. Suppose a humanoid robot needs to use 14 linear joint actuators, each linear joint adopts a deep groove ball bearing and a four-point contact bearing, which are widely used at present, and these bearings play the role of working with motors, lead screws, etc., to achieve linear actuators to provide different travel and reverse speeds.
The bearing is one of the internal structures of the coreless motor and the planetary reducer, the core components of the dexterous hand, and the humanoid robot dexterous hand is expected to use 24 plain bearings, 24 ball bearings and 36 needle roller bearings. In terms of the application of coreless motors, as the core component of dexterous hands, we assume that each robot needs to use 12 coreless motors, and the coreless motor includes 2 bearings inside, and sliding bearings can be selected. In terms of planetary reducers for dexterous hands, we estimate that 12 planetary reducers are required for each robot dexterous hand, and we expect to use 2 ball bearings and 3 needle roller bearings that provide torque density and torsional rigidity for each planetary reducer.
Focus on the research and development, production and sales of self-lubricating bearings, and form the technical advantages of robot bearing reserves. Changsheng Bearing focuses on the research and development of self-lubricating bearings and materials, as well as the promotion and application in new fields, and the development type is a high-tech enterprise. Humanoid robots have the potential to use plain bearings in many parts such as joints, motors, and reducers.
4.3 The downstream application market of lead screw is considerable, and the "dual track of people and vehicles" opens up room for growth
4.3.1 The core transmission component of mechanical motion, the lead screw can be divided into three main types
Lead screws can be mainly divided into three types: trapezoidal threaded screws, ball screws and planetary roller screws.
Trapezoidal lead screw: Relying on the oil film between the thread mother and the lead screw to produce relative sliding work, sliding friction to complete linear motion. The structure of the trapezoidal lead screw is simple, mainly composed of screw and nut, which is simple and convenient to install, but the accuracy is low.
Ball screw: It is composed of a lead screw, a ball, a nut, a circulator, a sealing ring and an oil hole, and the nut is composed of a steel ball, a pre-pressed sheet, a reverser, a dust preventer, etc. The characteristics of ball screws include low friction loss, high transmission efficiency, high precision, high axial stiffness, non-self-locking, and reversibility of transmission.
The operation of the ball screw is based on the rolling motion of the steel ball in the nut, which has higher efficiency than the traditional sliding screw, and the required torque is only less than 1/3 of the traditional sliding screw, which can easily convert the linear motion into rotary motion, which is very suitable for saving the power of the drive motor.
Planetary roller screw: mainly composed of lead screw, nut, roller, internal gear ring and cage, planetary roller screw around the main threaded screw, planetary arrangement and installation of 6-8 threaded roller small lead screws, relying on a plurality of rollers and screws, nuts between the thread meshing transmission to convert the rotary motion of the servo motor into linear motion.
Compared with ball screws, planetary roller screws have the advantages of high load-bearing, impact resistance, small size, high speed, low noise, high precision, long life, easy installation and maintenance, and strong environmental adaptability. Tesla's humanoid robot Optimus mainly uses inverted planetary roller screws, which are expected to become screw structures mainly used for robot linear joints in the future.
4.3.2 Humanoid robots are the first choice for linear joints, and the market space of planetary roller screws is expected to exceed 100 billion yuan in 30 years
Inverted planetary roller screws are widely used in Tesla's humanoid robot Optimus. According to different classifications, planetary roller screws can be divided into standard type, reverse type, circulation type, bearing ring type, differential type, etc., which are widely used in medical, aerospace, robotics and other fields.
Tesla's humanoid robot Optimus widely uses inverted planetary roller screws, which can use the nut as a motor rotor to realize the integration design of the motor and the linear transmission mechanism, which is more and more widely used in electromechanical servo systems that require compact space.
The downstream demand for humanoid robots drives the expansion of the market space, and the roller screw market space is expected to reach 109.9 billion in 30 years. With the continuous increase of humanoid robots in the future, the market potential of planetary roller screws used in linear joints is expected to further grow.
At present, the unit price of planetary roller screws is about 10,000 yuan, assuming that the inverted roller screws will reduce costs every year under the trend of domestic substitution, it is expected that by 2030, the price of planetary roller screws is expected to drop to about 1,300 yuan each, and the global humanoid robot planetary roller screw market size will reach 109.9 billion yuan, and the market space CAGR is expected to be 151% from 2023 to 2030. The prospects for domestic substitution are broad.
4.3.3 Cutting into the ball screw leads the innovation of automobiles, and the technology application covers many parts of commercial vehicles and commonly used vehicles
Ball screws are worth thousands of yuan per vehicle in automobiles, and are mainly used in manual transmission and automatic transmission transmissions of commercial vehicles, automatic steering of commonly used vehicles and electronic parking systems.
The company's lead screw products play a key role in the field of commercial vehicles, especially in the components of manual to automatic transmissions, through precise motion control, to achieve the smoothness and reliability of car driving, and improve the driving experience.
In passenger cars, the company's lead screw products are widely used in automatic steering systems, making the vehicle more agile in driving, while improving driving safety, and the high-precision manufacturing of the lead screw ensures the accuracy and stability of the vehicle when steering.
In addition, the development of steer-by-wire system (Steer-by-Wire, SBW) for the ball screw to bring growth space, with the progress and development of automotive technology, the automotive steering system will gradually adopt more stability and versatility of steer-by-wire system, the system cancels the steering wheel and the steering wheel between all the mechanical connection components, directly through the automotive electric drive to achieve the car's steer-by-wire steering, at present, Tesla has applied for a patent for steer-by-wire system, the use of steer-by-wire system will enhance the value of new energy bicycles。
The company's lead screw also plays a key role in the electronic parking system, which automates vehicle parking and start through the motion control of the lead screw, improving the convenience and safety of parking. With the rise of electric vehicles, the demand for electronic parking systems has further increased, presenting potential growth opportunities for the company.
4.3.4 The lead screw has been designated by the commercial vehicle main engine factory, and is expected to enter the humanoid robot industry in the future
The company has set a fixed increase to expand the production capacity of ball screws, and the products are first used in the automotive industry. In 2022, Changsheng Bearing announced a fixed increase plan, in which it plans to invest 265 million yuan to expand the production capacity of self-lubricating bearings and ball screws, including 30,000 sets of ball screws to expand the new track of lead screws.
At present, the company's lead screw has been designated by the commercial vehicle main engine factory, and the future production capacity is expected to cut into the robot production roller screw. The company has a certain technical level and innovation ability in lead screw manufacturing.
Through continuous investment in research and development, the company is committed to improving the performance, durability and intelligence of lead screw products to meet the needs of automobile manufacturers for high quality and advanced technology, and consolidate its competitive advantage in the market.
At present, the company has obtained the designation of commercial vehicle OEMs, and other passenger car customers are in the process of development. In addition, although the company's current lead screw production capacity is mainly for the automotive industry, ball screws and roller screws are similar in terms of processing equipment, and are expected to be put into the field of humanoid robots for roller screw production in the future.
The investment plan of Chuzhou Warner, a shareholding company, will inject new impetus into the company's performance growth. Chuzhou Warner, a 45%-owned company owned by Changsheng, has a production capacity of 600,000 sets of vacuum electronic parking for new energy vehicles and ball screws for commercial vehicle shifts. Through this series of strategic initiatives, the company is expected to expand the synergistic advantages of ball screw technology, help the company to provide customers with ball screw products in 2023, and bring strategic opportunities and competitive advantages for the company's future performance growth and market expansion.
5. Earnings forecasts and valuations
5.1 Key Assumptions
The company's main business is the research and development, production and sales of self-lubricating bearings and high-performance polymers, which are widely used in automobiles, construction machinery, energy, and other industries.
With years of technology accumulation and product development practice, the company's self-lubricating bearing products have reached the technical indicators of the world's mainstream automobile and construction machinery manufacturers and their supporting manufacturers, and have the ability to carry out synchronous development for domestic and foreign OEMs. It is expected that the company's sliding shaft products in the automotive industry share will increase steadily, the construction machinery industry sliding shaft will gradually pick up, and the wind power gearbox is expected to bring new growth points to the company's performance, and the company's business is expected to continue to grow.
Key assumptions about the company's main business:
Metal-plastic polymer self-lubricating rolled bearings: The main application scenarios of metal-plastic polymer self-lubricating rolled bearing products are the automotive industry, and the company's sliding shaft shipments in the automotive industry have continued to increase in the past 23 years, and at the same time, it has obtained some high-value new projects, which have simultaneously improved in terms of capacity utilization and project value.
In the future, with the increase in the penetration rate of new energy vehicles, and the demand value of new energy sliding axle bicycles is expected to be greater than that of traditional energy vehicles, and the company continues to obtain high-value new projects, it is expected that the company's performance and profitability of sliding axles in the automotive industry will continue to improve.
In addition, the company's wind power gearbox slip shaft performance is expected to be included in this type of bearing, wind power slide shaft is expected to further promote the company's future performance growth, 24 years from the wind power slide shaft is expected to be in small batches, to promote the company's performance growth to further accelerate.
It is estimated that in 23-25 years, the company's metal, plastic, polymer self-lubricating rolled bearing revenue growth rate was +25.00%/+39.54%/+38.21%, and the gross profit margin in 23-25 years was 45.00%/47.45%/47.01%.
Bimetallic boundary lubrication wrapped bearings, metal-based self-lubricating bearings, copper-based boundary lubrication wrapped bearings: bimetallic boundary lubrication wrapped bearings, metal-based self-lubricating bearings and copper-based boundary lubricated rolled bearing products are mainly used in the construction machinery industry, affected by the relatively sluggish construction machinery industry, the revenue growth rate of the three types of slip shafts in 22 years is slow, and the three businesses are expected to grow steadily in the future with the recovery of domestic and foreign construction machinery demand.
It is estimated that in 23-25 years, the company's bimetallic boundary lubrication rolled bearing revenue growth rate will be +5.00%/+10.00%/+10.00%, and the gross profit margin will be 25.50%/25.00%/24.00% respectively.
It is estimated that in 23-25 years, the company's metal-based self-lubricating bearing revenue growth rate will be +5.00%/+10.00%/+10.00%, and the gross profit margin will be 25.50%/25.00%/24.00% respectively.
It is estimated that in 23-25 years, the year-on-year growth rate of the company's copper-based boundary lubrication coiled bearing revenue will be +10.00%/+10.00%/+10.00%, and the gross profit margin will be 26.00%/25.00%/24.00% respectively.
Non-metallic self-lubricating bearings: The downstream of non-metallic self-lubricating bearings mainly corresponds to electronics, chemicals, food and other industries, and it is expected that the revenue of this business will maintain a growth trend. It is estimated that the year-on-year growth rate of the company's non-metallic self-lubricating bearing revenue in 23-25 years will be +15.00%/+15.00%/+15.00%, and the gross profit margin in 23-25 years will be 55.00%/55.00%/55.00% respectively.
Construction machinery precision parts: the company has obvious technical and customer advantages in the construction machinery industry, and it is expected that 1 trillion yuan of new national bonds is expected to promote the recovery of the construction machinery industry, and we expect that the downstream demand of the construction machinery industry is expected to bottom out from 2024 to 2025. Therefore, it is expected that the performance of the company's construction machinery precision parts will grow steadily.
It is estimated that the year-on-year growth rate of the company's construction machinery precision parts revenue in 23-25 years will be +5.00%/+7.00%/+10.00%, and the gross profit margin will be 6.00%/6.50%/7.00% in 23-25 years.
Copper powder and other metal materials and others: The subsidiary, Jisheng New Materials, mainly produces copper powder and other products, with the main purpose of providing raw materials for the company to alleviate the risk of price fluctuations. Therefore, it is expected that the performance of the company's copper powder and other metal materials will remain stable.
It is estimated that the year-on-year growth rate of the company's copper powder and other metal materials revenue in 23-25 years will be +20.00%/+20.00%/+20.00%, and the gross profit margin in 23-25 years will be 20.00%/20.00%/20.00% respectively.
It is estimated that the company's net profit attributable to the parent company in 23-25 years will be 2.52/3.31/417 million yuan respectively, a year-on-year increase of 146.6%/31.6%/26.1%, and the corresponding EPS will be 0.84/1.11/1.40 yuan.
5.2 Valuation
Relative valuation
It is estimated that the company's net profit attributable to the parent company in 23-25 years will be 2.52/3.31/417 million yuan respectively, a year-on-year increase of 146.6%/31.6%/26.1%, and the corresponding EPS will be 0.84/1.11/1.40 yuan.
Considering (1) the company's automotive sliding shaft shipment is smooth, has been recognized by global users, and is cooperating with many well-known customers for research and development, it is expected that future shipments will continue to increase, and the automotive sliding shaft market space is broad;
(2) The domestic construction machinery market is gradually supported by policies, and the construction machinery industry is expected to recover, and the demand for construction machinery slide shafts is expected to pick up;
(3) The trend of "slip and roll" of wind power gearbox is obvious, and some of the company's wind power slip shaft products have been tested, and the wind power gearbox slip shaft is expected to be large-scale in small batches in 24 years;
(4) The application scenario of sliding bearing is suitable for humanoid robots, and the company has a certain accumulation of robot sliding shaft technology, which is expected to replace rollers in the field of humanoid robots, and the market space for humanoid robot sliding shafts is broad;
(5) The company will increase and expand the ball screw production capacity, and the holding company has the ball screw production capacity, which is expected to focus on humanoid robots in the future and open up the company's potential profit growth space.
The company's comparable companies include Schunk Technology, Wuzhou Xinchun, Xinqianglian, etc., among which the main products of Schunk Technology are also sliding bearings, and Wuzhou Xinchun and Xinqianglian are both bearing industry companies.
As of January 9, 2024, the average 24-year PE of the three comparable companies corresponds to approximately 23X. Considering that the concept of Wuzhou New Year humanoid robot is strong, which has raised the overall average PE valuation, we give the company a corresponding 19XPE in 2024, corresponding to a target price of 21.05 yuan.
6. Risk Warning
6.1 Risk of fluctuations in the prices of key raw materials
The main raw materials used in the production of self-lubricating bearings include copper, steel and polymer materials, of which the price of copper accounts for a high proportion. As the basic raw material of the national economy, the price trend of copper is affected by multiple factors such as macroeconomy, copper futures market, supply and demand, etc., and shows large fluctuations.
The company's copper purchase price is generally determined with reference to the spot price of electrolytic copper of Shanghai Nonferrous Metals Network. Therefore, the fluctuation of copper prices will directly affect the company's production costs, which in turn will affect the gross profit margin of products and the stability of operating performance. If the company cannot improve the market competitiveness of its products and improve the bargaining power of downstream industries by developing new products and reasonable pricing, it will reduce the company's ability to cope with the risk of cost increase and comprehensive gross profit margin decline caused by fluctuations in raw material prices, including copper.
6.2 Risk of Macroeconomic Cyclical Fluctuations
The company specializes in the research and development, production and sales of self-lubricating bearings, and its products are widely used in automobiles, construction machinery, port machinery, plastic machinery, agricultural machinery and other industries. Due to the strong cyclical characteristics of the above-mentioned downstream industries, the self-lubricating bearing industry in which the company is located also shows certain cyclical fluctuations.
Generally speaking, when the macro economy grows rapidly, the market demand for automobiles, construction machinery, port machinery, plastic machinery, and agricultural machinery is also rapidly increasing, thereby promoting the healthy and rapid development of the self-lubricating bearing subdivision industry;
Therefore, macroeconomic cyclical fluctuations may have a significant impact on the Company's operating results, and the Company is subject to the risk of macroeconomic cyclical fluctuations.
Risk of macroeconomic cycle fluctuationsThe market demand of the company's products is greatly affected by the investment in fixed assets, technological transformation and industrial policies in the downstream fields, and the investment in the downstream industries is closely related to the national macro policies and economic development cycles. If the introduction of macro policies is unfavorable, economic development slows down, and the demand of downstream industries is less than expected, it will have an adverse impact on the market demand of the company's bearing products.
6.3 Exchange Rate Fluctuation Risk
The company's export business is mainly denominated and settled in euros and US dollars, and the procurement of raw materials in China is settled in RMB.
If the exchange rate of RMB against the euro or the US dollar fluctuates significantly, and the company fails to take effective countermeasures such as timely adjustment of the linkage mechanism between product selling price and exchange rate fluctuation, shortening the period of foreign exchange settlement and sales, and reducing the proportion of foreign exchange settlement income, the company will continue to face the risk of exchange rate fluctuations.
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