This report is read as follows:
The company is the first echelon of the domestic LED chip industry, the layout of the Mini is earlier, and now has a leading advantage in backlighting and direct display; at the same time, the profitability of the company's substrate business driven by the rebound of the industry boom may continue to improve.
Main points of investment:
Maintain the "overweight" rating. We maintain the company's forecast of EPS of 0.07,0.13,0.19 yuan from 2021 to 2023, with corresponding growth rates of 369%, 84% and 52%, respectively. Considering that the company's profitability is dragged down by the substrate business and is currently in a recovery period, we maintain the company's 2022 PE target of 120 times, corresponding to a share price of 15.6 yuan.
Starting with the semiconductor layout, the business diversification is further. The company and Zhuhai Huafa will each invest 150 million yuan to set up Zhuhai Huafa Huacan Advanced Semiconductor Research Institute. The joint venture company will focus on the core common key technologies, forward-looking key technologies, and stable process and industrial application technology development of advanced semiconductors. The company uses its own funds to invest in advance, which will not affect the main business, and the establishment of the institute aims to integrate R & D resources and train R & D personnel, and aims to serve the company's medium-and long-term strategic goals.
Mini LED layout leading, substrate business profitability rebounded. The company achieved mass production of Mini LED in 2019. At present, the company's RGB chip has been used in many Mini LED projects of mainstream manufacturers, and the backlight chip has also completed the layout in key areas such as smart screen, TV, notebook computer, e-sports display, car control screen and so on. The company's Mini LED layout is in a leading position. In addition, the company's substrate business has suffered large losses in recent years, but the unit marginal cost has decreased significantly. The gross profit margin of 2021H1's substrate business is-1.25%, which is 11.8% higher than the same period last year. With the rebound of the prosperity of the industry, the profitability of the substrate business may continue to pick up.
Catalyst. The demand for Mini LED backlit applications broke out.
Risk hint. The epidemic repeatedly affected the demand, and the turnround progress of the substrate business did not meet expectations.