The company has been engaged in consumer electronics and vehicle electronics for 10 years around touch display module and thinning business, and has become the world's leading precision processor of thinning services and touch display module business in the display supply chain. We estimate that the company's automotive electronics sector accounts for nearly 40% of the company's revenue in 2021, and starts rapid growth with the trend of high-end and intelligent display screens in the industry, which is becoming the company's second growth curve; in the consumer electronics sector, the smartphone LCD module business has hit bottom, the traditional thinning business has a stable market position and stable profit contribution, and the future VR/ wearable module and UTG emerging thinning business are expected to contribute to the increase. We continue to be bullish on the development of the company, forecasting that the annual EPS of the company in 2020-21-22 will be 0.42 to 0.54 PE, respectively, and will be given a 30-fold PE in 2022, corresponding to the target price of 16 yuan, covering for the first time and giving a "buy" rating.

Company overview: recognized touch display precision processors in the industry, deep touch display integration and thinning business, consumer electronics and automotive electronics two-wheel layout. The company was founded in 2000, listed on the gem of Shenzhen Stock Exchange in 2010, cut into the touch screen industry, entered the field of TFT thinning in 2011, and then successively entered the supply chain system of companies A, T, Sharp, BOE and other industry giants, and is currently the only thinning business supplier certified by North American major customers in China. The company has always focused on the touch display integrated high-end manufacturing industry chain, with a dual layout around the two major lower reaches of automotive electronics and consumer electronics. The revenue / return net profit in 2020 is 68.44 trillion yuan, respectively. Compared with the same period last year, + 13.62% and 1.33% respectively. We estimate that in 2020, the company's revenue from automotive electronics / consumer electronics accounts for about 25% and 75%, and profits account for about 20% and 80% respectively. And it is estimated that the share of the latest revenue and profit of Automotive Electronics has risen to 40%. Looking to the future, we believe that under the trend of big screen, Automotive Electronics will contribute to the maximum increment of the company's performance and open the company's second growth curve; UTG, VR and wearable will also drive the sustained growth of consumer electronics, and we are optimistic about the sustainability of the company's future performance.

Automotive electronics: benefit from the high-end, large screen trend, the plate will contribute to the maximum increment in the future. Under the background of automobile intelligence, vehicle display accelerates towards high-end (integration from display to touch display in structure, plastic to glass in material, 2D to 3D curved surface in shape, etc.), large screen (multi-screen + joint screen goes hand in hand, bicycle screen carrying area continues to rise), driving the accelerated growth of vehicle display industry. We estimate that the industry scale will reach 490 billion yuan in 2025, and CAGR will be about 12.2% in four years. The company has a keen insight into the trend of the vehicle touch display industry: in terms of products, create a "vehicle Sensor+3D curved surface cover + full fit + touch display integrated module"

In terms of technology, the overall layout around touch display technology, self-development of hot bending technology, materials and other cost advantages; customers, the head of new energy customers and traditional customers are covered, cut into the global 70% mainstream car brands through Tier1, customer quality is high; in terms of production capacity, the current full orders lead to tight production capacity, is rapidly laying out the production line, and the production capacity is expected to double in 22 compared with the same period last year. Benefiting from the trend of high-end and large screen in the industry, we believe that the company's automotive electronics business is expected to continue to achieve rapid growth in the next 3-5 years. It is predicted that the company's revenue from this business will reach 100 million yuan in 27-36-46 from 2021 to 2023, and its CAGR is expected to remain at 30%, 40% in three years. We are optimistic that the automotive electronics business will become the largest increase in revenue and profits of the company.

Thin business: contribute to stable profits, UTG is expected to open up new space. Thinning business, as the follow-up finishing process of panel manufacturing, meets the needs of the thinning of consumer electronic terminal products and has high technical barriers.

The company's thinning business can be divided into traditional thinning and emerging thinning: (1) the downstream demand of traditional thinning has become stable, and the company is expected to benefit from the eastward shift of LCD capacity and further increase its overseas market share in the future. The company has the first-mover advantage and technology monopoly position in traditional thinning, and is the leader of thinning in China. It maintains a long-term and stable relationship with Sharp, LGD, BOE and Huaxing Optoelectronics. At the same time, it is also the only designated supplier of NB/PAD thinning business for A customers in the mainland. This business has stable profitability and high profit contribution for many years. We expect the company's traditional thinning business revenue to maintain a growth rate of about 10% in the future. Contribute to stable profits. (2) the prospect of emerging thinning business is promising. The company's main layout of the UTG of the folding screen market is thinning, and the revenue scale is expected to grow at a high speed with the downstream folding screen volume, and the profit level is higher. The company's UTG research and development is smooth, the technology is leading, and it has been steadily supplied to the panel factory. We expect that the UTG thinning business in 2025 is expected to contribute 500 million yuan + income to the company, corresponding to more than 400% of CAGR in 2021-2024.

Consumer electronics touch display module: VR/ wearable products drive growth. The company's touch module, display module and touch display integrated business products cover small size (VR/ wearable devices), small and medium size (mobile phones) and medium and large size (NB/PAD) areas. Among them, small-size products are mainly VR display modules and Watch touch display modules, which are expected to usher in a large amount of terminal output, and the display technology continues to upgrade to OLED and Micro OLED. Company VR currently supplies Meta and Pico,Watch customers in global top4 enterprises covering the top five international smart wearable brand factories, and is expected to continue to grow with downstream volume + head customers. Small and medium-sized products are mainly mobile phones, shipments have fluctuated in the past two years under the influence of large domestic customers, and have now hit bottom, and future shipments are expected to pick up with the growth of mobile phone shipments from other customers. In addition, medium and large size products are mainly NB&PAD. At present, the downstream demand is stable, the company's production capacity and customer relationship are stable, and revenue is expected to grow steadily in the future. On the whole, we expect the company's revenue from this business to reach 23x34 / 4.1 billion yuan respectively from 2021 to 2023, and its CAGR is expected to remain at 20% Murray and 30% in three years. We are optimistic about the steady growth of the company's consumer electronics business in the future.

Risk factors: weak demand, macroeconomic risks, change of technological path, intensified competition in the industry, etc.

Investment advice: we estimate that the automotive electronics sector accounts for nearly 40% of the company in 2021. With the trend of high-end and intelligent display screens in the industry, the rapid growth is becoming the second growth curve of the company. We continue to be optimistic about the company's business development, forecasting that the company's annual EPS in 2021-22-23 will be 0.42 PE 0.54 Universe respectively. In view of the smooth progress and improvement in the proportion of the company's automotive electronics sector, with reference to the comparable company valuation, we will give it a 30-fold PE in 2022, corresponding to the target price of 16 yuan, covering it for the first time and giving it a "buy" rating.