Event: the company issued a restricted equity incentive program, and the number of stock options to be granted was 12.503 million, accounting for about 3.58% of the company's total share capital. Among them, 10.503 million were granted for the first time, accounting for about 3.01% of the company's total share capital; 2 million were reserved, accounting for about 0.57% of the company's total share capital, and the reserved portion accounted for about 16.00% of the total rights and interests granted this time.

Formulate revenue assessment targets, equity incentives to mobilize the enthusiasm of employees to show confidence in future development: the exercise price of stock options granted for the first time under this incentive plan is 10.00 yuan per share. In terms of performance evaluation, the company's performance assessment requirements for 2021-2023 are as follows: based on operating income in 2021-2023, the revenue growth rate from 2021 to 2023 is not less than 46.55%, 132.04% and 254.16%. The incentive exercise price is close to the current stock price, and the performance evaluation target is high, which shows the confidence of the company's future development. In terms of incentive scope, the equity incentive covers 248 employees, including directors, senior managers, middle managers and core technical (business) backbone personnel, which covers a wide range and helps to fully mobilize the enthusiasm of employees. This equity incentive reflects that the company attaches importance to research and development and talents, which is conducive to fully mobilize the enthusiasm of executives and employees, bind the interests of the company to employees, promote the construction and stability of the company's talent team, and contribute to the long-term development of the company.

The ultra-small spacing of COB shows that the product continues to expand, and the technological advantage leads to a strong rebound in profitability:

The revenue of 2021H1's domestic business reached 249 million yuan, which was + 158% compared with the same period last year. From a product point of view, LED display revenue is + 87.82% compared with the same period last year. Led lighting revenue is-6.6% year-on-year, and the revenue growth is mainly driven by LED display. Among them, the domestic LED display business income is 236 million yuan, + 177% compared with the same period last year; the international display business realized business income of 165 million yuan, + 29% compared with the same period last year. The company continues to benefit from the recovery of display screen demand driven by the improvement of overseas epidemic prevention and control and vaccination rate. In terms of COB ultra-small spacing display screen, 2021H1 achieved revenue of 196 million yuan, + 147% compared with the same period last year, of which domestic COB revenue increased significantly compared with the same period last year, in which the revenue of COB display products below point spacing P1.2 increased significantly, and the trend of LED display market demand for small and micro spacing is becoming more and more obvious. as a COB display enterprise with technical advantages, the company will fully benefit from the trend of ultra-small spacing evolution in the industry.

LED shows that the demand is accelerating, and the growth of the micro-gap market is full of momentum: from the demand side, the market demand for LED displays affected by the epidemic has declined significantly in 2020. Since the end of 3Q20, domestic and foreign demand has gradually recovered, and major commercial activities and sports events such as the European Football League and the Tokyo Olympic Games have also resumed one after another, so that the overall market demand has gradually recovered. In the context of the development of 5G+8K, with the accelerated development of new generation information technology, such as big data, cloud computing, Internet of things and artificial intelligence, people pay more and more attention to and demand for visual experience, and the large size and ultra-high definition of display terminals has become an obvious trend, promoting the rapid growth of small and micro-spaced LED industry. According to Omdia statistics, global shipments of LED small and micro-pitch displays increased by 10.4% in 2020 compared with the same period last year, and shipments of LED small and micro-pitch products are expected to grow by 59% in 2021. TrendForce predicts that the global small spacing LED display screen will have a compound annual growth rate of 27% from 2020 to 2024, among which products lower than P1.1 are expected to reach a compound annual growth rate of 50% in 2020-2024. The growth of the micro-spacing market is full of momentum.

The tight supply of raw materials promotes more orderly competition in the industry, and COB packaging reaches the application singularity: in the first half of 2021, the raw materials of the LED display industry increased significantly, and LED chips, PCB, and driver IC all rose in varying degrees, pushing up the production cost of LED display to a certain extent. In addition, the tight delivery time caused by the shortage of driving IC has led to a surge in the pressure of supply chain management and control in some enterprises. In the case of the decline in the overall order delivery capacity, the LED display industry tends to supply higher-profit high-end products, which promotes the upgrading of the industry as a whole, which is conducive to the concentration of production capacity to the head enterprises and promote more orderly competition in the industry. LED display products with spacing below P1.0, LED ultra-high definition display products based on COB advanced packaging technology have high protection, high reliability, high picture quality and other technical advantages and cost-effective advantages, which is the best technical path and mainstream direction for small and micro distance display above 100inch. With the reduction of the cost brought by large-scale production and the market expansion brought about by the progress of superposition technology, the micro-spacing LED display industry of COB packaging is expected to reach the application singularity, and the application space of the industry is expected to grow rapidly.

Raise the profit forecast and maintain the "buy" rating: we are optimistic that the company will continue to take the lead in COB technology. With the acceleration of ultra-small spacing market penetration in the future, COB packaging under P1.0 is expected to become the mainstream development direction in the future, and the company has obvious first-mover advantages. At the same time, the LED display industry has entered a period of repair affected by the epidemic, market demand is expected to recover as a whole, and the company's business is expected to benefit from the overall recovery of the industry. It is estimated that the return net profit of the company from 2021 to 2023 is 329 million yuan for 0.82, 0.81 and 0.23 for EPS, respectively, and the corresponding PE is 40x, 18x and 10x, respectively, and the net return profit of the company from 2021 to 2023 is estimated to be 0.82, 0.81 and 0.94 yuan, respectively.

Risk tips: market demand is not as expected, small spacing LED screen penetration is not as expected, production capacity climbing is not as expected, and the company's product promotion progress is not as expected.