Introduction to this report:

The company is a leading global display company. Micro's overseas market has already started. Currently, production capacity is progressing smoothly, and there is plenty of room for growth. At the same time, as industry sentiment increased, the company's performance picked up at an accelerated pace.

Key points of investment:

Maintain an “increase in holdings” rating. We maintain the company's 2021-2023 EPS forecast of 0.3, 0.39, and 0.51 yuan. The corresponding growth rates are 178%, 32%, and 29%, respectively. Referring to the industry valuation situation, we maintain the company's PE target of 35 times in 2022, with a corresponding stock price of 13.65 yuan.

Performance picked up at an accelerated pace, and there were sufficient orders on hand. In the first three quarters, the company achieved revenue of 5.83 billion yuan, +30% year on year, net profit of 5.2 billion yuan, +65.1% year on year; Q3 achieved operating income of 2.23 billion yuan in a single quarter, +40.7% year on year, net profit of 240 million yuan, +160.1% year on year. Mainly during the post-pandemic period, LED industry sentiment rebounded, industry concentration increased further, and the company benefited significantly as an absolute leading enterprise. Meanwhile, by the end of Q3 2021, the company's new orders for the whole year increased 42% over the same period last year and 14% over the same period in 2019; its smart display orders in China increased 68% over the same period last year, international smart display orders increased 42% over the same period last year. Domestic channels had already taken the lead in fulfilling the annual order target of 1.8 billion yuan, and NP's orders increased 84% over the same period last year. The company's on-hand orders were sufficient, and the performance was highly sustainable. In addition, Micro products are advancing smoothly in overseas markets, and orders are growing rapidly. In the first three quarters, they achieved revenue of more than 200 million yuan. Micro is the company's key product layout, and it is expected that it will also enter a rapid release stage.

The expansion of production capacity continues to advance. Judging from the recovery in industry sentiment, the company's capacity expansion of the three major production bases continues to advance. The integration of the Shenzhen production base has been completed; the Hunan production base was put into operation in July, and production capacity climbed rapidly. It is expected that production capacity will reach 6000 kk/month in January 2022; Li Jing's production capacity has reached 800 KK/month by July. The original plan was to double production capacity by 2022, but due to strong downstream demand, production expansion plans will be advanced.

Catalyst: The demand for high-definition displays is rapidly increasing.

Risk warning: Affected by the epidemic, the arrival of some equipment to the factory was delayed, and the company's production capacity construction was not addressed