Deepening the optical lens business, developing fields such as smart displays and automotive electronics: Since its establishment in 2005, the company has continued to accumulate in the field of optical lenses. Among them, it has a prominent position in the field of high-end security lenses, with a market share of over 80%. As the basic market of the company's business, the security business is deeply tied to first-tier manufacturers such as Hikvision and Dahua Co., Ltd., and profitability has maintained steady growth. In addition, the company is actively expanding its non-security lens business and accelerating the expansion of markets in the fields of laser projection, vehicle lenses, mobile phone lenses, virtual reality, etc. The diversified layout is expected to bring new impetus for growth. The company's revenue in 2020 was 1,288 million yuan, of which security business revenue was 941 million yuan, accounting for 73.06% of revenue; non-security business revenue was 323 million yuan, accounting for 25.08% of revenue. In the future, with the accelerated deployment of fields such as laser projection, VR/AR, and intelligent driving, the company's non-security business revenue share will gradually increase, and diversified business expansion is expected to open the ceiling of the company's performance.
The security market is growing steadily, and the expansion of automotive electronics, smart displays and other fields is accelerating. Looking at the demand side, the global security video surveillance camera market will maintain steady growth. It is estimated that global market sales will reach 330 million units in 2022, while the market for vehicle cameras, millimeter wave radar, and VR will develop rapidly. According to TSR data, global car lens sales reached 161 million units in 2020, and the market size reached 1.01 billion US dollars. It is estimated that in 2023, global car lens sales will reach 205 million units, and the market size will rise to 1,353 million US dollars.
Millimeter-wave radar side. According to relevant automotive research data, China shipped 8.19 million vehicle-mounted millimeter-wave radars in 2020, and the total installed volume is expected to soar to 31 million in 2025, with a CAGR of 30.7%.
In terms of VR/AR, global VR headset shipments reached 6.7 million units in 2020, an increase of 71.79% over the previous year. IDC predicts that global VR headset shipments will grow to 28.6 million units in 2025, with a five-year compound annual growth rate (CAGR) of 41.4%. On the AR side, IDC expects global AR glasses and headsets to sell no more than 1 million units in 2021, while the sales volume is expected to grow to 23.4 million units in 2025, and the VR user market is expected to exceed 90 million. Demand from new fields such as automotive electronics and VR/AR is expected to be the main driving force for the expansion of the lens market.
The competitive pattern in the high-end optical lens market is clear, and industry concentration is expected to increase further: Currently, the domestic optical lens market is mainly dominated by leading companies such as United Optoelectronics, Shunyu Optics, Yu Hitomi Optics, and Lianchuang Electronics. At this stage, many optical companies are in the automotive, security, and mobile phone fields. Among them, the competitive pattern in the high-end lens market is clear. The company's market share in the field of high-magnification high-end security lenses is as high as 85%, while competition in the low-end market, such as mobile phone lenses, is fierce. In various market segments, domestic optical lens manufacturers have differentiated advantages, and companies that are deeply involved in segments are expected to fully enjoy the growth dividends of emerging markets.
The automotive electronics, smart display and other fields are fully deployed, and the new production capacity investment is expected to form a second growth curve: in the automotive electronics field, the company already has products such as vehicle lenses, angle radars, and road coordination radars with a 220-degree field of view. Millimeter-wave radar products are mature and have entered the testing and sampling stage for some domestic car manufacturers. In the field of intelligent displays, the company has mastered ultra-short focus lens technology and applied it widely in new projection equipment. Currently, it has been used in laser TV products of companies such as Kantou, Changhong, Hisense, LG, Guangfeng, etc. The company plans to raise no more than 475 million yuan in 2020 to expand vehicle camera, intelligent projection and AR/VR production capacity. After completion, it will achieve an annual output of 18 million vehicle lens products, 2 million sets of new projection lens products, and 580,000 VR/AR all-in-one machines. The launch of new production capacity is expected to enjoy explosive dividends in the automotive and smart display industries.
First coverage, giving a “buy” rating: the company is growing steadily in the field of security lenses, performance in the automotive electronics field is being released at an accelerated pace, and the smart display business has huge potential for growth. As the epidemic eases and the economy recovers and production capacity for fund-raising projects is gradually released, the company will enter a new round of rapid growth, and its performance is expected to achieve high growth. The company's net profit for 2021-2023 is estimated to be 1.01/1.38/199 million yuan respectively, EPS is 0.45/0.61/0.88 yuan, and corresponding PE is 36X, 27X, and 18X respectively.
Risk warning: Market demand falls short of expectations, market competition increases risks, the penetration rate of intelligent driving falls short of expectations, and there is a high risk of customer concentration.