The performance of the annual report was in line with expectations, and the first quarter performance was impressive: the company is mainly engaged in R&D, production, sales and service of high-end special equipment. The main products include electronic machine assembly equipment, special equipment for photoelectric module production, and aviation special manufacturing equipment. In 2019, the company achieved operating income of 495 million yuan, down 16.16% from the previous year, and achieved net profit of 22.5728 million yuan, a year-on-year decrease of 75.19%. Some orders with a long inspection cycle for the company's new optoelectronic module products could not confirm revenue. Coupled with the impact of the company's electronic welding equipment and intelligent machine vision inspection equipment by increased macroeconomic and industry competition, sales revenue both declined, which led to a decline in performance; net operating cash flow was 31.018,600 yuan, a year-on-year decrease of 125.40%, mainly due to a decrease in sales payback in the current period As a result, the company spent 124 million yuan throughout the year, of which sales expenses increased 15.14% year on year, mainly due to additional transportation costs and after-sales labor costs for new product sales in the current period, and financial expenses increased 163.87% year on year. Mainly due to reduced bank deposit interest income and new loan interest expenses in the current period, R&D expenditure reached 54.9964 million yuan, a sharp increase of 99.17% over the previous year, accounting for 11.1% of revenue, mainly due to the increase in R&D investment for the current 3D-Lami project; year-end inventory increased 13.46% from the beginning of the period, mainly due to the increase in R&D investment in the current period of the 3D-Lami project. This is due to the increase in 3D laminating equipment for new products. According to the 2020 quarterly report released by the company, the company achieved operating revenue of 192 million yuan in the first quarter of 2020, a sharp increase of 215.87% over the previous year, and achieved net profit of 34.1798 million yuan. The sharp increase in performance was mainly due to new products developed by the company in 2019. The successful acceptance of some sales orders in the first quarter of 2020 confirmed revenue. Coupled with new mask machine sales revenue in the current period, software tax rebates and government subsidies increased over the same period last year, and related expenses decreased; net operating cash flow was 64.778 million yuan, a significant year-on-year increase. The increase of 1711.61% was mainly due to an increase in sales receipts in the current period; the company's expenses during the first quarter were 235.845 million yuan, of which management expenses were reduced by 36.14% and R&D expenses were 8.8535 million yuan, a decrease of 24.35% over the previous year; the company's gross sales margin was 33.84%, down 5.51 pcts from the previous year, and the net sales margin was 17.86%, a sharp increase of 34.4 pcts over the previous year, and profitability increased significantly over the previous year. In 2020, the company plans to continue to expand the optoelectronics business market.

The layout of the optoelectronics sector has shown results, and 3D laminating equipment has won BOE's big orders one after another: in 2019, the company continued to step up the development of special equipment for optoelectronic module production, successfully developed 3D-Lami laminating equipment that can be used for OLED flexible screen bonding, breaking through foreign technology monopolies and achieving import substitution.

3D-Lami equipment is lamination production equipment used for flexible OLED screens and curved glass covers. It is the main equipment in the OLED production module segment. In 2019, the company successively received purchase orders for BOE 3D-Lami laminating equipment and other products. The contract amount before tax exceeded 190 million yuan. In 2019, the company's 3D laminating equipment achieved revenue of 54.9958 million yuan for the first time, accounting for 11.1% of revenue. As customers inspect the equipment, revenue will be confirmed one after another. China's OLED production grew rapidly, from 2.49 billion US dollars to 13.11 billion US dollars, with an average compound annual growth rate of 51.48%. It is expected to reach 16.28 billion US dollars in 2019, an increase of 24.18% over the previous year. At present, domestic OLED investment is gradually shifting from the panel segment to the MDL module segment, which is expected to rapidly increase demand for later module equipment. According to estimates, the future demand for OLED back-end module processing production lines in mainland China will be around 240. According to the construction investment of 150 million each, the market space will be around 36 billion. In the future, the company will accelerate the pace of innovation in special equipment for optoelectronic module production, seize development opportunities in the industry, and is expected to achieve a further breakthrough in orders. Furthermore, related achievements such as the company's biometric fingerprint module production equipment and camera module production equipment have been converted into products and sold to the market one after another, which is expected to continue to contribute profits to the company.

The leading position in the electronic assembly industry has been consolidated and visual inspection equipment products are actively promoted: the company is market-oriented, improves product performance on the basis of existing products, and focuses on expanding the types of high-end electronic assembly equipment. During the reporting period, the vacuum reflow soldering developed by the company passed customer on-site verification tests and achieved small-batch production. It is expected to be used in aerospace, communications, automotive electronics and other industries in the future; the entire process of R&D was successfully promoted, and small-batch production has been achieved, mainly in the communications and automotive electronics industries; the MINI selective welding developed has been mass-produced; and the fully automatic special-shaped plug-in machine developed has been produced in small batches. The company is a leader in electronic welding equipment in China. In 2019, the company's electronic welding equipment achieved revenue of 338 million yuan. Although revenue declined due to macro factors and industry competition, the company's leading position did not change. Intelligent machine vision inspection equipment can replace manual inspection, and demand for intelligent machine vision inspection equipment in SMT production lines, panel inspection fields and other fields is gradually increasing. Currently, the penetration rate of such equipment in the domestic market is still at a low level, and the company has core technology in motion control and visual recognition. During the reporting period, the company participated in relevant industry forums and exhibitions held in 14 cities in China, used industry forums to give keynote speeches on intelligent machine vision inspection equipment, and introduced the performance and application scenarios of the company's AOI and 3D-SPI equipment to visually display the performance and application scenarios of AOI and 3D-SPI equipment to increase the promotion of products in the domestic market. In 2019, the company's intelligent machine vision inspection equipment achieved revenue of 557.18,400 yuan. As the company actively promoted the layout and the penetration rate of such equipment gradually increased, it is expected to become a growth point for the company's performance in the future.

Investment advice: The company's annual report performance was in line with expectations. The first quarter performance was impressive. The leading position in the electronic machine assembly industry was consolidated, which is expected to fully benefit from the wave of investment in OLED back-end module processing production lines. We predict that the company's EPS in 2020-2022 will be 0.31 yuan, 0.37 yuan, and 0.42 yuan respectively, and the corresponding PE will be 41.05 times, 33.78 times, and 29.71 times, respectively. Maintain a “Recommended” rating.

Risk warning: Macroeconomic downturn; industry competition intensifies; revenue recognition progress falls short of expectations; orders fall short of expectations.