Key points of investment
On August 25, 2023, Liande Equipment released the 2023 semi-annual report. The company achieved total operating income of 547 million yuan in 2023H1, an increase of 32.54% over the previous year, and achieved net profit of 76 million yuan after deducting non-attributable net profit of 76 million yuan, an increase of 192.40% over the previous year. 2023Q2 achieved total operating revenue of 279 million yuan, a year-on-year increase of 33.01%, a year-on-year increase of 4.58%, and realized net profit of 36 million yuan after deducting non-attributable net profit of 36 million yuan, a year-on-year increase of 116.67%, and a year-on-year decrease of 9.93%.
Based on the leading edge of panel module equipment in China, expand automotive electronics, third-generation semiconductors, and lithium battery equipment, and consolidate the foundation for long-term development. Liande Equipment's main products are semiconductor display automation module equipment, which is used in the middle and rear module assembly processes of flat panel display panels, mainly display modules such as TFT-LCD, OLED, and Mini/MicroLED. The company's product level is leading in China, and downstream cooperating customers include panel and consumer electronics companies such as JD, Huaxing Optoelectronics, Apple, and Foxconn. Based on the company's advantages in the field of display equipment, the company's module assembly equipment has been successfully expanded into applications in the field of automotive electronics, and has become a supplier of automotive electronics such as Automotive Electronics, Bosch, and Desai Seaway in mainland China. In addition, the company is actively expanding advanced packaging processes such as wafer-level packaging and third-generation semiconductor-related equipment. At the same time, it continues to increase R&D investment in equipment such as blue film for lithium batteries, injection machines, all-in-one cutting machines, battery assembly, and full-line automation equipment for the pack section.
Panel price recovery cycle, product gross margin is rising. Since March 2023, panel prices have continued to pick up, bringing demand for new production line construction to downstream panel manufacturers, but cyclical changes in the flat panel display device manufacturing equipment manufacturing industry are lagging behind, and the significant impact of the panel recovery cycle on the company's performance in the second half of the year may be reflected in the company's performance in the second half of the year. At the same time, higher panel prices will increase panel manufacturers' profits, giving companies relatively more room to profit. In recent years, the company's gross margin has continued to recover. From 2020 to 2023H1, the company's overall gross margin was 28.89%, 27.47%, 31.30%, and 36.82%, respectively. The increase in gross margin is also an important factor in the increase in the company's net profit.
New downstream technology has spawned new demand, and expanding overseas markets has welcomed a sharp rise in volume and price. New technologies in the display industry are developing rapidly. In recent years, domestic panel companies have gradually increased their investment in adding TFT-LCD panel lines and high-generation OLED panel lines, which has brought a large amount of demand for automation equipment and prompted the company to achieve an increase in orders. On February 17 and July 26, 2023, the company received two bid notices for the sixth-generation AMOLED (flexible) display production line from BOE in Chongqing. The winning bid amounts were 85 million yuan and 208 million yuan respectively. Mini/Micro LED is the next generation display technology that has emerged in recent years. According to the Institute of Advanced Engineering, the global Mini LED market size compound annual growth rate will reach 85% by 2025. Currently, the company's Mini LED-related equipment has been delivered to leading enterprises in the industry for production. The company is developing overseas markets smoothly, orders from major foreign customers continue to increase, customer stickiness is increasing, and at the same time, the gross margin of overseas orders is higher, which helps increase the company's overall gross profit margin.
Incremental orders and gross margin increased at the same time, opening up room for the company to grow rapidly in volume and price.
[Investment advice]
In the first half of 2023, Liande Equipment achieved impressive results in both revenue and profit growth. The panel equipment produced by the company has advantages, and has established stable cooperative relationships with leading downstream companies. At the same time, the company is also entering the fields of automotive intelligent cockpit system equipment, semiconductor packaging and testing equipment, and lithium battery equipment, creating a new growth curve for the company. On the market side, downstream panel prices have been lowered and overseas orders have increased the company's gross profit. Panel manufacturers continue to increase investment in production lines for new display technology, bringing incremental orders, and the company is about to enter a period of rapid growth in volume and price. Therefore, we expect the company's revenue for 2023/2024/2025 to be 1,301/16.23/1,942 million yuan respectively, net profit to be 175/2.14/258 million yuan respectively, corresponding EPS of 0.99/1.20/1.46 yuan, and corresponding PE of 24/20/16 times, respectively, maintaining the “increase in holdings” rating.
[Risk Reminder]
There is a risk that market competition will increase. Enterprises in the same industry and new entrants may increase investment to achieve technological innovation, or market through price reductions, leading to increased competition and the company's profit margin being compressed; there is a risk that downstream demand falls short of expectations. The company's products are mainly used in the consumer electronics sector. Currently, the consumer electronics industry is still booming, downstream enterprises may reduce capital expenses, and there is a risk that the company's products will not be in sufficient demand;
The risk of new product development failure, rapid technological iteration of display technology, and the company may not have grasped market demand accurately and in a timely manner, resulting in new products not being recognized by the market.