Event: The company released its report for the first quarter of 2023. The company's revenue during the reporting period was 1,628 million yuan, an increase of 5.21% over the previous year, the net profit of the mother was 145 million yuan, an increase of 86.24% over the previous year, and the net profit of the non-return mother was 137 million yuan, an increase of 120.76% over the previous year, benefiting from the recovery of commercial activity. The industry inflection point was evident: the company's main business was R&D, production and sales of smart display products. The company's market position was at the forefront of the industry. The company's market position was steady at the forefront of the industry. LED displays The market share is in the top three in the world for many years in a row. In 2022, Smart Display achieved revenue of 6.422 billion yuan, accounting for 90.76% of revenue. Affected by the general environment in 2022, the company's domestic business delivery was affected to a certain extent. The annual report revealed that in 2022, the company's domestic business revenue fell 31.48% year on year. The 2023 quarterly report showed that benefiting from the recovery in business activity, domestic commerce showed an inflection point in the industry. During the reporting period, revenue was 1,628 billion yuan, an increase of 5.21% over the previous year, and the net profit of the mother was 145 million yuan, an increase of 86.24% over the previous year.

New technologies such as miniLED and XR virtual shooting ignite new vitality in the industry: As new display technologies, mini LED and micro LED have characteristics such as high definition, high gray scale, and high contrast compared to traditional LED displays. The display effect has improved significantly. They are gradually opening up the market in the two major application fields of direct display and backlighting. Currently, the application fields are mainly government surveillance and command centers, high-end commercial scenarios, high-end cinemas, etc. Since Mini LED displays have poor graininess when viewed at close range, as future display costs decrease year by year, Mini LED displays are expected to open up the all-in-one conference and consumer markets. In 2022, XR virtual shooting showed a good trend. With the support of large-scale events such as the Snow and Ice Festival, Spring Festival Gala, and New Year's Eve parties, XR technology came out of the loop many times. Various new technologies such as miniLED, XR, and naked eye 3D have ignited new vitality in the industry and are expected to further open up the market space of the industry.

The production capacity of the intelligent manufacturing base has gradually climbed, consolidating the company's leading position: the annual report revealed that the company's Huizhou Daya Bay Intelligent Manufacturing Base, with a construction area of 400,000 square meters, is currently the largest LED intelligent manufacturing base in the world. The second phase of the Daya Bay Intelligent Manufacturing Base mainly lays out the smart display field and the miniLED project. With the release of production capacity in Daya Bay, the company's own production capacity can gradually absorb all orders. Subsequent production capacity will gradually increase according to market demand, which is expected to further consolidate the company's leading position in the global market.

Investment advice: We expect the company's revenue from 2023 to 2025 to be 8.845 billion yuan, 11.056 billion yuan, and 13.82 billion yuan respectively, while the net profit of the mother is 596 million yuan, 751 million yuan, and 945 million yuan respectively, maintaining the “buy-A” investment rating.

Risk warning: industry demand falls short of expectations; market competition intensifies; new product promotion falls short of expectations.