Incident: The company released its 2022 annual report on April 10. The company achieved revenue of 1,359 million yuan for the full year of 2022, an increase of 13.18% over the previous year; achieved net profit of 96 million yuan, an increase of 83.49% over the previous year; and realized non-net profit of 88 million yuan, an increase of 151.59% over the previous year. On a quarterly basis, the company achieved revenue of 335 million yuan in Q4 2022, an increase of 3.26% over the previous year, a decrease of 19.71%; it achieved net profit of 19 million yuan, an increase of 66.35% over the previous year, a decrease of 53.14% from the previous month; and achieved net profit of 15 million yuan after deducting non-return to the mother, an increase of 123.13% over the previous year and a decrease of 66.82% over the previous month.

High growth in performance and a significant increase in profit levels: In 2022, the company focused on its main business, actively developed new products and businesses, and achieved rapid growth in performance. Revenue from the two major display module businesses increased steadily: revenue from backlight display modules was 1,058 billion yuan, up 13.85% year on year; LCD module revenue was 0.9 billion yuan, up 26.90% year on year. The company's comprehensive gross margin in 2022 was 18.35%, up 1.64 pct year on year; net interest rate was 7.08%, up 2.72 pct year on year. In terms of expenses, the company's sales, management, R&D, and financial expenses rates for the full year of 2022 were 1.35%/5.13%/7.50%/-2.34%, respectively. The year-on-year changes were -0.12/-0.14/0.66/-2.79pct, respectively. Changes in the company's financial expenses in 2022 were mainly due to increased exchange earnings.

Business development has achieved remarkable results, and Mini LED products continue to be optimized: the company is deeply involved in the field of backlight display modules and has achieved remarkable results in the fields of Mini LED, new energy vehicles, VR, etc. In 2022, the company made a breakthrough in oversized vehicle backlighting and successfully developed a 55-inch oversized backlight module product. In terms of backlight products, in addition to receiving orders for traditional backlight display modules, the company also obtained seven fixed orders for new Mini LED backlight products, which were gradually introduced into mass production in 2023. In terms of new energy vehicles, in addition to developing the terminal customer T Company, it also obtained new orders for BYD backlight modules from leading domestic NEV car company; new progress has been made in VR product development, and fixed orders will be put into mass production in 2023. The LOCAL-DIMMING (LOCAL-DIMMING) backlight display module developed by the company has introduced fully automatic fixed crystal lines for blue light Mini LEDs, and mass production, debugging and optimization have been carried out. The company adheres to its main business as its core development, thoroughly explores market opportunities, actively lays out emerging business fields, actively exploits the company's core technical reserves and product development advantages, and consolidates its leading position in the industry.

Benefiting from the high boom in the automobile industry, they joined hands with Dongchao Technology to improve the industrial chain layout: EVTank expects global NEV sales to reach 25.42 million units in 2025, with a compound growth rate of 32.92% over the next 3 years. As an important part of automotive electronics, in-vehicle displays have also ushered in a new wave of market development. GlobalMarket Insights predicts that the market size in the automotive display sector will reach $24 billion by 2025. 86.8% of the backlight display modules produced by the company are used in the automotive field. While consolidating its existing position in the automotive backlight display field, it has further expanded into the NEV automotive display field. It has now successfully entered the NEV supply chain system for domestic and foreign brands. Through the capital increase of Dongchao Technology, the company began to lay out aerial displays in the field of high-end automotive displays, and combined the advanced technology and rich industrial resources of the two parties in their respective fields to expand more application scenarios for in-vehicle displays. In 2022, Dongchao Technology made progress in automotive, elevator control, health fields, public places, smart homes, etc., and has entered the supplier catalogue of Dongfeng Motor, Jianghuai Automobile, BAIC, etc., and has delivered small-batch orders to some car companies. The company and Dongchao Technology have joined hands to further develop aerial displays in the field of automotive high-end displays, which is expected to benefit from the increase in demand for automotive electronics and further open up the company's profit space.

The first coverage gave an “increase in holdings” rating: The company's main business is R&D, production and sales of backlight display modules, liquid crystal display modules, touch decorative panels, display components, smart displays, etc. The company's products are mainly used in high-end automobiles, mobile phones, tablets, digital cameras, small game consoles, industrial control displays, smart homes, VR and other fields. In addition, the company also develops, produces and sells products such as touch screens, rubber parts, and hardware. As Mini LED continues to penetrate and VR technology matures, the company's related business expansion is expected to continue to benefit from increased demand for new energy tracks and further growth in performance. The company's net profit for 2023-2025 is estimated to be 152 million yuan, 190 million yuan and 251 million yuan respectively, EPS is 0.71 yuan, 0.89 yuan and 1.18 yuan respectively, and PE is 20X, 16X and 12X respectively.

Risk warning: downstream customer concentration risk, international trade uncertainty risk, automobile industry cyclical fluctuation risk, market competition risk.