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Dynamic tracking report of the company.

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Domestic high-end security lens leader, master core customer resources

Joint Optoelectronics has optical lens design and production capacity with optical zoom, optical anti-shake and other design capabilities, it is in the first position in the field of high-end monitoring lenses in China, and is one of the leading enterprises of domestic security optical lenses. The downstream applications of the company's products include: security monitoring, projector, mobile phone camera, digital camera, camera, car camera system and other fields. Downstream major customers include: Haikang Weishi, Dahua shares and other domestic security equipment leaders, as well as Panasonic, Sony Group Corp and other well-known enterprises.

Terminal competition continues to escalate, driving the market for optical lenses to rise in volume and price. Optical lens is the core component of camera module. at present, more and more cameras begin to upgrade to high-end products with optical anti-shake and optical zoom functions. as a result, the cost of optical lenses in camera modules is increasing. Downstream markets such as security surveillance, smartphones and car cameras are entering a long-term competitive pattern of functional upgrading, and optical lenses, as the core parts of cameras, are expected to usher in a business cycle of rising volume and price in the future. the sustainable growth ability of optical lens enterprises has a strong support.

Focus on the high-end security market, ushering in the production capacity release cycle. United Optoelectronics is not only the leading supplier of domestic high-end security lenses, but also the core supplier of domestic security equipment manufacturers such as Haikangwei and Dahua shares. With the continuous improvement of the global share of domestic security enterprises, their domestic suppliers will also be supported by sustained growth. United Optoelectronics focuses on the high-end market of security, and the increasing proportion of its high-end products has brought a significant optimization of its income structure, which is reflected in that its security lens product ASP is about four times that of the industry and is still steadily improving year by year. We believe that with the start of the company's fundraising project, the company's high-end lens development capacity and production capacity will grow rapidly in the future, strengthening its leading position in the high-end lens market.

Extend from security to emerging markets, and constantly expand market space. At present, the security industry is in a steady growth cycle, and the company is constantly laying out to the emerging end market in order to further open up the market space and expand the high value-added lens market. Specifically, projectors and laser projection TV are expected to become new demand for high-end lenses outside the security industry.

At present, about 3 million projectors are sold in China each year, and about 50 million televisions are sold (of which the penetration of laser projection televisions is less than 1 per cent). At the same time, the lenses of projectors and laser projection televisions are basically monopolized by Japanese companies. United Optoelectronics has successfully achieved the domestic replacement of high-end lenses in the field of security, and realized the scale overshoot with the help of domestic security leading customers. In the future, the company is expected to replicate the successful experience of domestic substitution in the field of projector and laser projection TV and open the ceiling of its own market space.

The global security video surveillance lens market sold 63 million pieces with a value of US $339 million in 2011, and sold 122 million pieces with a value of US $456 million in 2015. the average annual compound growth rate was 17.97%, and the average annual compound growth rate was 7.66%. It is expected that the global security video surveillance lens market will continue to grow steadily in the next few years, with sales of 184 million pieces in 2020, with a value of US $653 million, with an average annual compound growth rate of 8.57% and 7.47%, respectively. In the future, the demand for optical lenses in the security monitoring field will continue to grow, mainly due to the increase in the market demand for security cameras and the expansion of the market scale brought about by the upgrading of high-end lenses.

Security intelligence drives the upgrading of optical lens products

The development trend of security video surveillance products will put forward higher requirements for the imaging quality of optical lenses, such as resolution, anti-shake technology, fog penetration technology, large magnification, large aperture, large wide angle and high reliability. According to TSR, shipments of security zoom lenses will increase from 25 per cent in 2015, 3x zoom lenses will increase from 23 per cent in 2015 to 32 per cent in 2020, and 1080p resolution placement lenses will increase from 65 per cent in 2015 to 72 per cent in 2020. With the technological upgrading of optical lenses, the improvement of product value will be able to accelerate the growth of the market scale.

Focus on the high-end market, security competitiveness is obvious. From the average price of products, the price of the company's security products is significantly higher than the average level of the industry, and the competitiveness of high-end products is obvious. From the perspective of the company's development history, zoom lenses such as 720p and 1080p have dominated the security products since 2014, with higher average prices; with the maturity of 720p and 1080p products, the company's products began to reduce prices in 2015, which led to a decline in the average unit price to a certain extent; in 2016, due to the rapid increase in sales of the company's new 4K high-price products, the unit price of joint photovoltaic security products rose again.

Comparing the unit price of the company's products with that of the industry, we can find that the average price of the company's security products is significantly higher than the industry average, and has a significant competitive advantage in the high-end market. Our analysis believes that this mainly comes from the company's high-definition, optical zoom and optical anti-shake technology capabilities. The company is the first manufacturer to realize the mass production of optical zoom and optical anti-shake lens in China, breaking the technological monopoly of Japanese manufacturers.

Give a rating of "overweight".

The company is a typical technology-driven enterprise, through its own R & D capabilities, the company successfully entered the security lens supply chain system in 2014, and won the competition with Japanese enterprises. We are optimistic about the long-term development of the company as a high-end lens supplier, especially the stable market support provided by downstream customers. The company is expected to achieve net profit of 87 million yuan, 112 million yuan and 153 million yuan respectively in 18-19-20. The current market capitalization corresponds to a price-to-earnings ratio of 34.2 to 26.7 yuan, respectively, and is rated as "overweight".

Risk hint: the growth of the security market slows down, and the competition for optical lenses intensifies.