Events:

The company issued a semi-annual performance forecast for 2023, which is expected to achieve a net profit of 80-10 million yuan for 23H1, and a net profit loss of 1500-20 million yuan after deducting non-profit, an increase of 41.07% MUE 21.43% over the same period last year.

Comments:

23Q2 reversed losses and the inflection point of reducing costs and increasing efficiency appeared. The company's 2023Q1 net profit is-64.53 million yuan, 2023Q2 is expected to be 7253 to 74.53 million yuan, to achieve a turnround; 2023Q1 deducts non-net profit of-13.88 million yuan, 23Q2 is expected to be-1.13 million yuan to-6.13 million yuan, the decline is narrowed. The rebound of the company's profitability is mainly due to the company's active efforts to improve management efficiency, reduce costs and increase efficiency.

Domestic consumer electronics module leading companies, downstream demand is expected to recover. The company is a leading third-party module enterprise in China, and its main products include small and medium-sized liquid crystal display modules and optical camera modules, which are widely used in smart phones, tablet computers, smart wear and other fields. The company's main customers include Wentai Technology, Huaqin Communications, Dragon Flag Holdings and other mobile phone solutions, as well as OPPO, vivo, Samsung, Voice, Glory and other terminal manufacturers. It shows that the module industry has experienced a two-year downward cycle and is currently in the bottom area, following the upstream panel showing a sustained recovery trend. According to TrendForce data, in late July 2023, the price of large-size panels continued to rise, while the prices of some monitors and notebook panels rose slightly. Looking forward to the follow-up with the recovery of downstream consumer electronics demand, the company's profitability is expected to repair upward, optimistic about the company's performance elasticity after the rebound in demand.

Actively layout display chip closed test business to create the second growth curve. According to the forecast of Frost&Sullivan, the demand of display driver chip closed testing industry in China is growing rapidly, and the market size will grow from 18.43 billion yuan in 2021 to 28.08 billion yuan in 2025, with CAGR reaching 11.1%. With the transfer of panel production capacity to Chinese mainland, it shows that the localization trend of chip supply chain is obvious. In December, the company established a subsidiary Kunshan Tongxingda, which cooperated with Kunshan Riyue New Co., Ltd. to invest in the complete closed testing process of gold bump manufacturing (GoldBumping) + wafer testing (CP) + glass clad packaging (COG) and thin film clad wafer packaging (COF) (phase I), with a corresponding production capacity of 20,000 pieces per month.

According to the company's interactive question and answer platform, in May 2023, Kunshan Phase I closed test project has entered a small-scale mass production period and is progressing smoothly, which is expected to bring new growth momentum for the company.

Investment suggestion: the company's revenue from 2023 to 2025 is expected to be 8294410.114 billion yuan, respectively, and the net profit of its mother is 0.82 billion 185.00 million yuan, covering for the first time and giving a "overweight" rating.

Risk tips: demand decline, closed test business production is not as expected, performance and valuation are lower than expected