The small spacing shows leading companies, and COB packaging is the strongest king. Lehman Optoelectronics is a leading LED manufacturer in China, with an integrated industrial layout from packaging to application. The main products include LED large screen displays, LEDHUB smart conference systems, LEDPLAY Lehman giant screens for home use, and LED smart lighting. Thanks to a high-quality R&D team, the company launched COB small-pitch LED display panels in 2017, becoming the first listed company in the industry to master COB small-pitch LED display panel production technology. The company has been deeply involved in the COB packaging field for many years. In the first half of 2021, the market share of COB display products exceeded 30%, ranking first in China. In September 2021, the company released the second phase of the equity incentive plan. Based on 2020 revenue of 819 million yuan, the 2021-2023 revenue growth rate was no less than 46.55%, 132.04%, and 254.16%, demonstrating the company's confidence in development.
Ultra high-definition displays spawn the demand for micro LEDs, and seizing the first-mover advantage of COB benefits the development of small micro-spacing. Pixel spacing exceeded P1.0mm, and the average price of small-pitch LEDs dropped to 25,000 yuan/square meter. Continued technological maturity has accelerated the implementation of micro LED display applications.
In 2020, the global small-pitch LED display market was about 2.7 billion US dollars. Benefiting from the expansion of small-pitch displays from proprietary displays to 100 billion markets such as commercial displays and home displays, compounded by a rebound in demand caused by the mitigation of the epidemic, it is estimated that by 2025, the small-pitch LED display market will exceed 9 billion US dollars, with a CAGR of 27%. The COB technology path gradually became prominent along with the continuous narrowing of pixel spacing. Lehman, as the COB leader, had a first-mover advantage. Currently, the COB penetration rate in the domestic small-pitch LED display market is less than 10%, and it is expected to be close to 25% by 2025.
Lehman leads the big screen of wisdom and shares the 100 billion market. Based on COB packaging technology, unique patented pixel engine technology advantages that can greatly improve visual resolution and significantly reduce costs, the company independently develops and mass-produces multi-specification COB 8K microLED ultra-high-definition display products with a spacing of 0.6mm to 1.9 mm. It has successively launched products such as the Lehman smart conference system LEDHUB and the 138-inch 4K flagship LEDPLAY Lehman giant screen, which has completed coverage from the professional display market to commercial displays and home display markets. According to the State Administration of Radio, Film, and Television and the Ministry of Industry issued the “UHD Video Industry Development Action Plan (2019-2022)”, it is estimated that by 2022, the overall scale of the domestic UHD video industry will exceed 4 trillion yuan, the 4K ecosystem will be basically improved, and a breakthrough will be made in the development and industrialization of 8K key technology products. Taking advantage of Dongfeng's policy, the company revolves around the development of the 8K UHD industry. With an industry-leading yield rate of 98.49%, it is expected to quickly open up the growth ceiling and achieve rapid growth in performance.
Profit forecasts
The first coverage gave a “buy” rating. We expect the company's net profit for 2021-2023 to be $0.78, 193, and $317 million, respectively, and the corresponding EPS is $0.22, 0.55 and $0.91 respectively. The current stock price corresponds to the 2021-2023 PE value of 52.44, 21.23, and 12.90 times, respectively. We are optimistic that COB packaging will achieve rapid penetration in the display field after rapid cost reduction. As a domestic COB packaging leader, the company will benefit significantly and increase its share. With the continuous optimization of COB processes and costs, the company will rapidly advance from professional display to commercial display and household display fields, further opening up room for growth and achieving rapid growth in performance.
Risk warning
The growth of the display industry, the increase in COB penetration, and the expansion of the company's production capacity fell short of expectations.