Matters: In late February 2019, Samsung and Huawei released the foldable phones Galaxy Fold and Mate X respectively, and the mobile phone industry entered a new era of folding screens. Guoxin Machinery's view: 1) The launch and popularity of folding screen phones will drive up demand for AMOLED panels, axes, touch controls, batteries, and FPCs. Among them, the demand for OLED display panels is particularly obvious, which is expected to accelerate the development of domestic display panel production equipment enterprises. 2) According to the company announcement, the company has successfully developed 3D vacuum bonding equipment for flexible OLED screens, breaking international monopolies and is expected to bring new performance increases to the company; 3) Profit forecast and investment suggestions: Net profit for 2018-2020 is expected to be 0.96/1.75/234 million yuan, corresponding to EPS of 0.39/0.72/0.96 yuan, corresponding to the current stock price PE of 50.9/27.8/20.8X, respectively, giving it an “increase in holdings” rating. Comment: Foldable phones lead the trend, favoring the demand for flexible OLED screens. Large-screen phones have better visual effects than small-screen phones, and can better perform functions such as playing games and watching videos, so large-screen phones have always been one of the main lines of mobile phone development. After the full screen, the trend of larger screens in mobile phones has hit a bottleneck. Currently, mainstream full-screen phones account for more than 90% of the screen, so it is difficult to increase the screen size without increasing the size of the phone. If you continue to increase the size of your phone, you will face problems that are difficult to carry. Foldable screen phones can balance large size and portability at the same time, and are expected to become the next main development line for larger mobile screens. On October 31, 2018, Rouyu Technology released the world's first foldable phone, FlexPai; on February 20, 2019, Samsung released its first foldable phone, GalaxyFlod; on February 24, 2019, Huawei released its first foldable phone, MateX. LCD and OLED are currently the two most important display panel technologies. LCDs cannot be folded because they are packaged in glass and require a backlight module. OLED, on the other hand, can be packaged using a flexible PI film to make a flexible OLED panel with folding function. Currently, it will be the only screen solution for folding screens. As various mobile phone manufacturers intensively launch folding screen phones and the cost of flexible OLED panels falls rapidly, the combined effect of the two will greatly stimulate demand for flexible OLEDs. According to IHS forecasts, global shipments of foldable OLED panels will reach 1.4 million pieces in 2019 and will grow to 50.5 million in 2025, with a compound annual growth rate of 81.77%. Since the display area of foldable OLED panels will double, the actual demand for flexible OLED panels will be more impressive. Domestic OLED projects have been launched one after another, and equipment companies have ushered in broad room for growth. Until 2016, almost all of the global flexible OLED panel production capacity was concentrated in South Korea's Samsung Display, with a market share of over 90%. As Apple first used flexible OLED panels on its tenth anniversary iPhone X in 2017, market demand increased dramatically. Mainland panel companies have invested in flexible OLED production lines on a large scale in the past two years. A number of production lines have achieved mass production, and production capacity and yield are progressing smoothly. They already have strong strength in this field. According to statistics, at present, the number of flexible OLED panel production lines built or under construction in mainland China has reached 12, and the planned monthly production capacity has reached 461 K/month. Taking BOE as an example, it has successively launched Chengdu B7, Mianyang B11, Chongqing B12, and Fuqing B15 projects. Each project has invested more than 40 billion yuan, of which equipment investment accounts for more than 60%. Huge investment by local enterprises has provided a rare development opportunity for domestic OLED panel manufacturing equipment companies. The 3D laminating device is the “core device” of the module segment. The entire flexible OLED manufacturing process is divided into three stages: Array, Cell, and Module. The post-module process cuts the packaged panel to the actual product size, then performs various processes such as polarizer attachment, control circuit and chip bonding, and performs aging tests and product packaging, mainly involving TABIC/OLB equipment, PCB equipment, bonding equipment, testing equipment, etc. In December 2018, the Korean media “BusinessKorea” reported that the South Korean government plans to restrict the export of OLED production equipment and plans to designate OLED equipment as a “national core technology.” In the module process of domestic OLED production lines, South Korea has almost a monopoly on bonding, bonding, and testing equipment. According to industry research information, each OLED module production line requires a set of 3D laminating equipment (4 units in total) in the screen bonding process. Each set sells for about 4 to 6 million US dollars. It is the core equipment of the module stage process. Until then, this equipment has been monopolized by Korean companies. For some reason, South Korea currently prohibits the sale of this equipment to domestic panel companies, and a breakthrough in localization is very urgent. 3D laminating equipment market space: Taking BOE as an example, according to research, a 48K/month 6th generation OLED production line corresponds to 24 module production lines, and each module line corresponds to a set of 3D lamination equipment. A total of 24 sets of 3D lamination equipment are required. Assuming that the price of the equipment after localization is 20% cheaper than imported equipment, that is, $320-4.8 million per set, then the demand for 3D laminating equipment for this 48K line is 51-760 million yuan. Looking at the next 3-5 years, the total planned domestic production capacity is 466k, corresponding to demand of about 230 units, and corresponding market space of about 5-7.2 billion yuan. In 2020-2021, about 150K of production capacity will be mass-produced one after another, which will usher in a peak investment period for this equipment. 3D laminating equipment breaks foreign monopolies and is expected to bring new performance increases to the company. The company's main business includes three sectors, including electronic welding equipment, AOI testing equipment, and optoelectronic module equipment. The products are mainly used in the 3C consumer electronics manufacturing industry, automotive electronics manufacturing, communication equipment manufacturing, and aerospace manufacturing. In the field of welding equipment, the company is a leader in high-end electronic welding equipment in China, with a market share of about 30%. As the largest producer in the global PCB industry, China's share of global total output value has increased from 31.2% in 2008 to 50.5% in 2017. As the 5G, automotive electrification and intelligence processes accelerate, the PCB industry is developing in the direction of high-end and integrated development, and the company's high-end product positioning will continue to benefit. In addition, the company's intelligent machine vision inspection equipment market space is gradually opening up. In the first half of the year, the revenue growth rate of this business reached 43.8% year-on-year, and is expected to continue to be an important growth point in the future. The company's optoelectronic module business mainly includes camera modules, under-screen fingerprint recognition modules, display modules, COG/FOG and other related equipment. The main customers are OFIL, Foxconn, Flextronics and other manufacturers, which currently account for about 20%. As the penetration rate of folding screens and fingerprints under screens increases, it is expected that traditional electronic welding equipment and optoelectronic module equipment will form two-wheel drive in the future. By business, in the first half of 2018, welding equipment revenue was 216 million yuan, accounting for 66.4%; AOI equipment revenue was 38 million yuan, accounting for 11.6%; and other business revenue was 71 million yuan, accounting for 22%. According to the company's performance report, in 2018, the company achieved total operating income of 590 million yuan, an increase of 23.68% over the previous year; realized total profit of 111 million yuan, an increase of 21.23% over the previous year; realized net profit of 95.66 million yuan, an increase of 19.01% over the previous year. The main reason for the company's performance growth over the previous year was the steady increase in sales revenue of the company's electronic welding equipment and intelligent machine vision inspection equipment; the company's sales revenue for some photoelectric module special equipment increased significantly, forming a new profit growth point; the software received by the company declined The year-on-year increase in taxes and government subsidies, as well as the company's use of idle capital for financial investment, further boosted the growth of corporate profits. According to the research content announced by the company, the company began to focus on 3D bonding equipment for flexible OLEDs in 2017 and participated in joint development with core customers. Currently, prototype production has been completed, and verification is being carried out on clients. As foreign technology locks down on this type of equipment, and in addition to the market demand and development trends of downstream customers, the company will greatly benefit from the trend of localization of OLED equipment, which is expected to become a new growth point for the company's performance. Investment advice: ICL leaders await an increase in industry concentration driven by policy trends. The company broke foreign monopolies and successfully developed 3D laminating devices for OLEDs. Benefiting from the trend of mobile phone folding screens and the increase in OLED penetration, the OLED equipment business is expected to bring new growth in performance to the company. The estimated net profit for 2018-2020 is 0.96/1.75/234 million yuan, corresponding to EPS of 0.39/0.72/0.96 yuan, respectively, and 50.9/27.8/20.8X corresponding to the current stock price, PE is 50.9/27.8/20.8X, respectively, giving it an “increase in holdings” rating. Risks indicate a decline in demand for electronic welding equipment; downstream customer OLED production line progress is lower than expected; new product release is lower than expected;