Incidents:
The company released its report for the first quarter of 2023. The 23Q1 company achieved operating income of 543 million yuan, an increase of 12.89% over the previous year and an increase of 11.51% over the previous month; achieved net profit of 7.59 million yuan, a year-on-year decrease of 130.67%, and a decrease of 91.85% in the month-on-month loss; basic earnings per share were 0.01 yuan/share, and the performance was basically in line with expectations.
Signs of a recovery in terminal demand are beginning to show, with significant month-on-month improvements in 23Q1
There are signs of a recovery in market terminal demand in the first quarter of 2023. The company's production capacity release is superimposed on product positioning and market demand is accurately grasped. Production and sales of high-end products represented by backlighting, high light efficiency, mini LED, and silver mirror inverted products are booming. The company's capacity utilization rate, production and sales rate have remained consistently high, and the sharp rise in volume and price has led to a steady increase in operating income. At the same time, the company strengthened independent technological innovation and cost control. The R&D cost rate in 23Q1 was 6.64% (+0.78pct compared to +0.78pct), and the cost rate for the period was 9.10% (-0.14pct year-on-year). Benefiting from the recovery in industry demand and the company's refined management model, the company's total profit and net profit improved markedly month-on-month, while deducting non-net profit improved markedly.
Mini/Micro LED has remarkable advantages. Funding projects enhance technical capabilities Mini/Micro LED display products have excellent performance, a wide range of applications, and are driven by strong market demand. In the display field, Mini/Micro LED can improve reliability and pixel density. In the field of backlighting, Mini/Micro LED has great potential in the field of commercial displays and is expected to gradually replace LCD and projection products; in the field of backlighting, LCD displays using Mini/Micro LED backlight technology in high-end large-screen televisions and other products It has a competitive advantage. The implementation of the “Mini/Micro LED Chip R&D and Manufacturing Expansion Project”, which the company obtained administrative approval from the Securities Regulatory Commission at the beginning of the year, is expected to further strengthen the development momentum of the company's new display technology.
Profit Forecasts, Valuations, and Ratings
Considering that industry demand is expected to bottom out and the market share of the company's products continues to increase, we expect the company's revenue in 2023-25 to be 24.31/26.67/2,942 billion yuan respectively. The corresponding growth rate will be 19.86%/9.67%/10.33%, respectively, and the net profit of the mother will be 139/163/210 million yuan respectively, the corresponding growth rate is 319.11%/17.58%/28.89%, and EPS is 0.25/0.30/0.39 yuan per share, respectively. Considering that the company is the main supplier to the LED industry and is leading the business efficiency industry, it is recommended to keep an eye on it.
Risk warning: downstream demand falls short of expected risks; risk of falling product prices; production capacity release falls short of expected risk.