Incidents:
On March 30, the company announced that it intends to acquire 72.79% of the shares of G2 Touch Co., Ltd. at a price of 5.50 US dollars per share using its own capital of 385.2002 million US dollars (about 268 million yuan).
Comment:
G2 Touch has high quality assets, and the purchase price is reasonable. G2 Touch was founded in 2009 and is mainly engaged in chip design for touch solutions. In 2021 and 2022, the company's revenue was $272 million and $887.678 million, respectively, and net profit was $93.4723 million and $156.40,500, respectively. The total assets of G2 Touch in 2022 were 200 million yuan, of which monetary cash was 166 million yuan, accounting for 83.12%, the balance ratio was 8.61%, and the net assets reached 186 million yuan. Overall, the company's debt ratio is low, the asset structure is good, and the asset quality is high. At the same time, judging from the purchase amount combined with the net asset size of G2 Touch, the PB valuation of this acquisition is about 2 times, and the purchase price is quite reasonable.
Consolidating the development strategy of the dual main business, G2 Touch and Beijing Xinneng are expected to jointly develop the “outdoor business+chip business” industrial pattern of dual main business operation. The subsidiary chip company is one of the few companies in the world that can provide Mini LED active display driver chip products. It is also a domestic company that has both direct display and backlit Mini LED active display driver chip products. G2Touch is a chip design company that uses a fabless model to provide customers with touch solutions for LCD and OLED displays. It has completed customer development for major domestic and foreign manufacturers such as Samsung, HP, Dell, and BOE. We believe that this acquisition, on the one hand, further consolidates the company's dual business development strategy, encourages the company to have a richer business matrix in the display IC field, and also complements the product line. On the other hand, there are similarities between G2 Touch and Beijing Xineng in terms of downstream customers, which is conducive to future customer expansion and collaborative development, as well as strengthening the depth and breadth of cooperation with customers.
The advantages of G2 Touch technology are obvious. Entering the future development of the automotive market is worth looking forward to. The core team of G2 Touch mainly comes from electronics companies such as Samsung and LG, and has many years of industry experience.
It currently has 129 patents registered and held worldwide, and 37 patents are being applied for. The single-layer On-Cell solution has the advantages of strong edge consistency and high accuracy in segmented fields such as 7-inch touch laptops and tablets. At this stage, the notebook panel industry has begun to pick up. According to statistics from Jibang Consulting, the number of laptop panels shipped in Q1 2023 was 38.7 million pieces, and Q2 shipments are expected to increase by more than 20% over the previous month. With the shift of the LCD industry to the domestic market and the development of the domestic OLED panel industry, the localization process of supporting industries related to the panel industry will accelerate, and the upstream chip industry is expected to directly benefit. At the same time, G2 Touch and global OLED head panel manufacturers are jointly developing automotive products. The first stage of R&D and sample production has now been completed. The products have been exhibited at the 2023 Las Vegas Consumer Electronics Show. Under the trend of intelligent development in the automotive industry, the future development prospects of G2 Touch in the automotive field are worth looking forward to.
Investment advice and profit forecasting
Consider that the company's promotion of product clearance in 2022 may have a certain impact on profits. Meanwhile, after the Q4 epidemic control was fully liberalized last year, there was a short-term suppression of product terminal sales, and the chip business was still being invested.
Therefore, we predict that in 22-24, EPS will be 0.06/0.09/0.13 yuan respectively, corresponding to 129/88/66 times PE, maintaining the “increase in holdings” rating.
Risk warning
The epidemic is repeated; channel expansion falls short of expectations; new business integration falls short of expectations; exchange rate fluctuations, and goodwill is impaired.