Main points of investment
Event: notice of the General Office of the State Administration of Radio and Television on the issuance of the iterative implementation Plan of Radio and Television Technology (2020-2022) on December 7, 2020. The notice puts forward five main tasks for media domain, communication domain, receiving domain, security domain and ecological domain, and puts forward safeguard measures from four aspects: organization, technology, capital and talents.
4K8K UHD acceleration, traditional racetrack new machine: this "notice" further emphasizes the implementation of the "Ultra HD Video Industry Development Action Plan (2019-2022)", promotes the iterative innovation and integration development of 4K/8K UHD video industry, and points out that under the 5G trend, we will vigorously launch 5G high-tech video products, new applications, and new business type. The company has been deeply engaged in the display industry for a long time, focusing on indoor and outdoor high-end LED fixed and leased display products, with a leading level of technology in the industry. High-definition / ultra-high-definition industry has taken advantage of the policy, the current LED display screen can achieve P1.0 pixel spacing, the technical level has achieved the demand of 4K/8K high-definition, so the traditional LED display track is expected to coruscate new opportunities in the industry.
The trend of software and hardware integration is prominent, and intelligent control systems become the core competitiveness: the "notice" proposes that the receiver should develop intelligent radio and television terminals, vigorously promote terminal standardization and intelligence, and promote the application of human-computer interaction technology. this puts forward higher requirements for the integration of terminal hardware equipment and software system. Under the current market competition in the display industry, due to the gradual improvement of high-definition, real-time, interaction and other requirements, the trend of integration of hardware equipment and software control system is prominent. In addition to having technical advantages in the field of terminal equipment, the company is also in the first echelon of the industry in terms of software systems. The 64K video control system independently developed by the company optimizes the design of high-resolution, large-belt LED display screen, perfectly solves the stability problem of the cascade use of multiple controllers, and the 8K video control system technology with independent intellectual property rights has been successfully applied to transportation hubs, television stations, high-end auto shows, large airports and other occasions around the world, successfully reached the international advanced level through the appraisal of scientific and technological achievements. Therefore, we believe that under the current trend of the integration of software and hardware technology, the company's software system reserve will help the hardware product business.
It shows that the demand is gradually picking up, and Mini/Micro and financial technology empower the future: due to the great impact of the epidemic on overseas markets in the first three quarters, the company's performance is not satisfactory compared with the same period last year, but after entering the fourth quarter, according to our research on the industrial chain, orders from downstream terminals and mid-stream packaging enterprises have picked up significantly, and the market demand is expected to recover gradually, so the company is expected to get out of the trough in 2021H1. Get back to the normal growth track. Looking to the future, with the promotion of ultra-high definition industrial policy in the display field and the strengthening trend of Mini/Micro LED, the company is expected to continue to take the lead in the layout of technology reserves in this track in the early stage of development. At the same time, Financial Technology and American Express have jointly signed a strategic cooperation agreement, and will jointly participate in bidding for major projects such as smart bank, smart transportation, smart city and smart telecom in the future. strategic cooperation will add impetus to the company's financial technology business. Therefore, in the long run, the company's core business will usher in more room for development after the labor pains affected by the epidemic.
Investment advice: we expect earnings per share from 2020 to 2022 to be 0.18 yuan, 0.32 yuan and 0.42 yuan respectively.
The return on equity is 7.6%, 12.2% and 13.8% respectively, maintaining the buy-B recommendation.
Risk hints: the sustained overseas demand recovery of the epidemic is not as expected; the penetration of the Mini LED market is not as expected; LED shows that competition in opening up the domestic market is intensified; landscape lighting business continues to be affected by macro policies; and the intelligent transformation of the network is not as expected.