Recently, Pathfinder released reports for 2022 and the first quarter of 2023. With the arrival of the outdoor sports boom, companies that have been deeply involved in the outdoor products market for many years have resisted the downward pressure of consumption, and at the same time combined with the newly expanded chip business, achieved annual revenue of 1,139 million yuan, a slight decrease of 8.35% over the previous year; and achieved net profit of 70 million yuan, an increase of 28.38% over the previous year. With the liberalization of the market and the recovery of downstream demand, the company's business conditions improved markedly in Q1 2023, achieving revenue of 243 million yuan, an increase of 14.63% over the previous year; achieving net profit of 18 million yuan, up 123.97% year on year; after deducting net profit of non-return mother's net profit of 13 million yuan, a sharp increase of 573.51% over the previous year.
Outdoor activities are gradually gaining popularity, and all kinds of outdoor equipment are covered in depth. According to the “2022 Outdoor Camping Consumption Trend Insight Report” released by JD, the consumption preferences of domestic tourists are gradually shifting to fragmentation and short distance trips; exquisite camping is rapidly rising. Also, according to the “2023 Xiaohongshu Annual Life Trends” published by Xiaohongshu and the Institute of Sociology of the Chinese Academy of Social Sciences, the number of notes related to “going far away” increased 194% year on year in 2022, and the number of notes related to “going wild to the doorstep” rose 287% year on year. Outdoor sports have gradually settled into a culture in the country. The company specializes in R&D, design, operation and sales of outdoor products of various brands such as TOREAD (TOREAD), TOREADKIDS, TOREAD.X. The products have now covered the main fields of outdoor life in China, including hundreds of varieties of outdoor clothing, shoes, backpacks, tents, sleeping bags, hiking equipment, etc.
Actively broaden new retail channels, and brand influence continues to increase. The company continues to explore new social retail channels such as WeChat Mini Program and Douyin, strengthen promotion and interactive communication with community fans through new marketing models such as “live streaming marketing”, “celebrity marketing”, and “knowledge marketing”. It actively cooperates with celebrities, big V, KOL celebrities and professional MCN organizations on various e-commerce and community platforms to acquire a large number of young new users and increase the user purchase conversion rate. In September 2022, Liu Haoran became the global spokesperson for the Pathfinder brand and initiated topical interactions on platforms such as Weibo, WeChat, Xiaohongshu, Douyin, and video accounts to continuously increase brand awareness and influence.
Entering the chip circuit is expected to start the second growth curve in performance. The company's chip business uses Beijing Xinneng Chip Design Company as the carrier to sell three types of IC and module products for mini LED display drivers, pressure touch, and micro LED display drivers to industry-related customers, while also providing corresponding solutions and technical services. It is one of the few companies in the world that can provide miniLED active display driver chip products. Mini LED display drivers are mainly used in the fields of direct display and backlighting. Direct display products are mainly supplied to various commercial display fields such as large indoor and outdoor displays, transparent displays, large professional displays, and large conference room screens. Mini LED direct display products are packaged by the company itself, and the manufactured direct display pixel driver chips are packaged together with RGB lights to complete unique LoS packaging products; backlighting products are mainly used in household fields such as televisions, laptops, monitors, and vehicle displays.
It is proposed to acquire G2 Touch, and the assistant will enrich the high-end display chip product line. Earlier, the company announced that it intends to acquire 72.79% of G2 Touch Co., Ltd.'s shares in G2 Touch Co., Ltd. using its own capital of 385.20.2 million US dollars. After the transaction is completed, G2 Touch will become a holding subsidiary of the company and will be included in the scope of the company's consolidated statements. G2Touch is a chip design company that uses a fabless model to provide customers with touch solutions for LCD and OLED displays. Its chip products are mainly used in laptop displays, car displays, mobile phones, tablets and other products. Currently, G2 Touch has 129 registered and owned 129 patents worldwide, and 37 patents are being applied for. End customers include domestic and foreign LCD and OLED panel manufacturers and terminal manufacturers such as Samsung, Dell, HP, BOE, etc. The automotive sector and global OLED head panel manufacturers have jointly developed automotive products. The first stage of R&D and sample production has now been completed, and the products have been exhibited at the 2023 Las Vegas Consumer Electronics Show. In the long run, this transaction is beneficial to enrich the company's high-end display chip product line, achieve complementarity between domestic and foreign markets, products and customers, further strengthen the construction of chip design capabilities, and enhance the competitiveness and profitability of the company's chip products.
[Investment advice]
The consumer electronics industry is now gradually recovering, and with the LCD industry moving to China and the rapid development of the OLED panel industry in China and the domestic OLED panel industry, the localization process of supporting industries related to the panel industry will accelerate. In combination with the proposed acquisition of G2 Touch, the company will further deepen the company's layout of the upstream chip industry in the panel industry, make full use of customer synergies, and is expected to generate industry scale benefits in the long term. Therefore, we expect the company's revenue to be 1,428/17.18/1,926 billion yuan in 2023/2024/2025; the estimated net profit returned to the mother will be 0.93/1.12/126 million yuan, EPS will be 0.11/0.13/0.14 yuan respectively, and the corresponding PE will be 80.90/67.37/59.63 times respectively. The first coverage was given, giving an “increase in holdings” rating.
[Risk Reminder]
Competition in the industry heightens risks;
Risk of falling inventory prices;
The results of R&D investment fell short of expectations.