Incident: On April 14, 2022, the company released its 2021 annual report, with operating income of 8.852 billion yuan, an increase of 33.45% over the same period of the previous year; the mother's net profit was 611 million, an increase of 162.56% over the same period last year.
The cost performance ratio of LED displays continues to improve, and the application market continues to expand: According to the “GLOBAL LED DISPLAY MARKET REPORT” report released in August 2021, Riyadh ranked first in the global market share of LED display products for 5 consecutive years, with the highest market share for small-pitch products, and the market share for indoor LED products. After years of development, the price and stability of LED display products have increased simultaneously, and the cost performance ratio has reached the optimal point. Small-pitch display products have gradually declined from high-end markets to prefecture-level cities and county-level cities in China, and have continued to expand from government applications to commercial applications. Demand for all-in-one video conferencing machines has increased dramatically under the pandemic, new growth in outdoor LED 3D screens, and creative displays such as spherical screens, canopies, ground screens, transparent screens, and hemispherical screens have continued to emerge. According to the annual report, the company's smart display sector revenue in 2021 was 6.899 billion yuan, an increase of 33.03% over the previous year. In 2021, the company started construction of the Changsha Smart Display Industrial Park, and achieved production with a production capacity of 6,000 KK by the end of 2021.
Micro LED continues to break through, opening up new markets for the company: the company Micro LED Technology launched the world's first 40-inch 2K (P0.4) micro LED standardized commercial display product in July 2020, and the industrialization process progressed as scheduled. According to the 2020 annual report, on October 29, 2020, Lijing, the world's first large-scale micro LED mass production base, was officially put into operation. The first phase was launched in 2020-2022, and it is expected that post-delivery production capacity of self-emitting modules will reach 1,600 KKK/month in 2022.
According to the company's 2021 annual report, Lijing's production capacity expansion of 800 KK/month has now been completed, and production has already been reached; a new Micro order of 320 million yuan has been signed. On the COG side, the annual report revealed that the company collaborated with TCL Huaxing to develop and produce the world's first 75-inch P0.6 oxide AM direct display micro LED TV sample. Simultaneously cooperated to develop the world's first AM glass-based transparent display sample. Combined with oxide TG device+3T1C driving technology, it represents the current peak of LED display technology and future display technology trends. A breakthrough in the micro LED sector is expected to open up new growth points for the company.
Lock in the supply of raw materials to guarantee gross margin levels: In the first half of 2021, the LED industry's upstream component driver ICs and lamp beads were seriously out of stock, and the company took measures to actively deal with the current and future raw material shortage risks. The annual report revealed that the company signed a warranty agreement with the driver IC supplier, agreed to meet the company's order requirements from May 2021 to December 2022, sign a quantity agreement with the LED lamp bead supplier, and meet the company's order requirements from January 2021 to January 2025. At the same time, supply prices are lowered compared to market prices, goods are picked up as needed, the supply of raw materials is locked in advance, the crisis of insufficient supply is avoided, and the company's gross margin level is guaranteed.
Investment advice: We expect the company's revenue from 2022 to 2024 to be 10.928 billion yuan, 13.496 billion yuan, and 16.601 billion yuan respectively, while the net profit of the mother is 1,039 billion yuan, 1,244 billion yuan, and 1,556 billion yuan respectively, maintaining the “buy-A” investment rating.
Risk warning: Industry sentiment falls short of expectations; production expansion projects fall short of expectations; market development falls short of expectations.