The company issued a preview of the 2023 mid-term report. In the first half of the year, revenue increased by 5% Mel 15% compared with the same period last year; net profit from home was about 320 million-360 million (yoy 20% MUE 35%); non-net profit was about 2.5-290 million (yoy 5.3% MUE 22.0%); net profit increased by 20% MUE 35%; net operating cash flow increased significantly, from-250 million yuan in the same period last year to about 200 million yuan.

Among them, in the second quarter alone, operating income increased by 8.5% Mel 27.6%, month-on-month growth of about 18.1% Mel 38.9%, net profit increased by 30% Mel 56%, and month-on-month growth of 63% Mel.

Smart display product research and development is accelerated, production capacity is actively expanded. In terms of products, in February 2023, outdoor Micro products have been developed and formed a mass shipping capacity, while Asic chips have been widely used in Micro LED products. In terms of production capacity, the company plans to expand the production capacity of Wuxi Micro LED production base from 800KK/ to 2000KK/ in 2023, and the total capacity will increase from 17600KK/ to 18800KK/ at the end of 2022.

The company has completed the reform and reorganization, and the development of the night tour business is waiting for the improvement of the macro environment. The night tour business of literature and tourism has been reformed and reorganized, and is actively arranging the combination of night economy and literature and tourism, and selecting projects with capital guarantee, such as special debts and special loans. At the same time, in February this year, the company set up a new company in conjunction with Tangshan Culture and Travel Group to actively develop the culture and tourism industry.

With the recovery of the culture and travel industry, the company's layout of the cinema market will go further. Combined with current order levels, the company expects to grow by 20% in 2023.

Integrate virtual reality business and constantly expand partners. In 2023, the company will integrate the domestic virtual reality related business into the "virtual moving point", and strive to increase revenue by more than 50% compared with the same period last year. This year, we have increased investment in research and development of the virtual reality plate, and reached a business cooperation in virtual photography with BABA. The company's virtual moving point has reached a strategic cooperation with JD.com Technology, focusing on "space computing", "digital human", "AI model" and other technologies, enabling film and television, industry, games and sports. In addition, NP's optical dynamic capture technology and Optitrack-led products have been widely used in more than 10 fields. Such as film and television shooting, industrial testing, education and training, medical rehabilitation, drone formation and so on.

We forecast that the company's earnings per share in 2023-2025 will be 0.30,0.40,0.52 yuan respectively (the original forecast is 0.39,0.51 yuan in 2023-2024). According to the valuation of the comparable company, we believe that the current reasonable valuation level of the company is 28 times the price-to-earnings ratio of 2023. The corresponding target price is 8.40 yuan, maintaining the buy rating.

Risk hint

The impairment of goodwill leads to a decline in net profit, the research and development of Micro LED technology is not as expected, and shows that the recovery of product demand is not as expected.