The company is a pioneer in the automotive display industry. It initially positioned its business as a Tier 2 service provider and is rich in downstream customer resources.

Currently, the industry is showing two major trends: first, the trend of large screens, and high-definition smart cockpits is expected to drive a triple rise in vehicle display volume and price, and a continuous increase in bicycle ASP, which in turn will drive continuous growth in the industry market size. According to KPMG data, it is estimated that China's automotive display market size will rise from 64.9 billion yuan in 2022 to 106.4 billion yuan in 2026, corresponding to a CAGR of 13%; second, the “screen separation” trend is beginning to show. The company is currently taking the lead in cooperating with upstream panel manufacturers Beijing Dongfang and Shenzhen Tianma to establish joint ventures in the automotive display industry company Transforming Tier 1 suppliers to directly connect with automakers, realize the entire process from customization, development, and integration to integrated production, reduce intermediate links, reduce costs, increase profitability, and thereby increase supply share among automakers. We believe that the company has first-mover advantages, resource advantages, cost advantages, and customer advantages. The company's current fixed target of 13.5 billion yuan is expected to support the company's steady growth. We forecast the company's 2023/24/25 EPS to be -0.16/0.55/0.95 yuan, respectively.

A pioneer in automotive displays, gradually transforming into a Tier 1 supplier. The company was founded in 2013 and is a comprehensive service provider for intelligent cockpits for automobiles in China. The company initially positioned itself as a Tier-2 service provider for automotive displays, implanting upstream display devices with the company's customized solutions into the complete set of electronic products of downstream Tier1 system integrators, and finally applied to automakers' automotive products; in line with the industry's “screen separation” trend, the company set up joint ventures with upstream core display device suppliers Jingdong and Shentanma in 2021 and 2022, respectively, and built its own factories. Transformed Tier 1 suppliers and began independent docking business with automakers. The company has abundant downstream customer resources, including leading domestic car companies such as BYD, Changan, Great Wall, Chery, GAC, Geely, Changan, and Xiaopeng.

The trend of intelligence is driving the volume and price of the industry to rise three times; the trend of “screen separation” is reconstructing the industrial chain pattern. Currently, there are two major trends in the automotive display industry. Trend 1: smart cockpit large-screen/multi-screen linkage and high-definition trends. In-vehicle displays are expected to rise three times in volume and price. Smart cockpits are an important component of automotive intelligence. Vehicle screens are an important part of smart cockpits. Electrification and intelligence drive the continuous upgrading of in-vehicle screens to larger screens, multiple screens, and higher definition, thus increasing the demand and value of screens. Furthermore, HUD and streaming rearview mirrors are safer, and the penetration rate is expected to continue to increase. Trend 2: The trend of “screen separation” is emerging, and the industrial chain pattern is being restructured. We believe that under the “screen separation” trend, upstream screen manufacturers can directly set up joint venture subsidiaries with Tier 2 or Tier 1 to complete the entire process from customization, development, and integration to integrated production, reduce intermediate links, increase profitability, and restructure the industrial chain pattern. Ultimately, three increases in vehicle screen display market volume, price, and profit are expected to drive continued growth in market size. According to KPMG's forecast, China's automotive display market will increase from 64.9 billion yuan in 2022 to 106.4 billion yuan in 2026, corresponding to a CAGR of 13%, so industry chain companies are expected to benefit greatly.

Four major advantages seize industry opportunities; good positioning helps steady growth. We believe that the core competitive elements of the automotive display industry are cost, technology and resources, and the company has four major advantages: 1) accurately research the “screen separation” trend in the automotive display industry and accumulate first-mover advantages; 2) deeply bind upstream screen manufacturers to establish resource advantages; 3) have cost advantages through technology, model innovation and integrated production; and 4) rich customer resources. We believe that the company's four major strengths will help the company seize the opportunities of change in the automotive display industry. Furthermore, according to the company's announcement, the company invested in the construction of an intelligent production line in Nantong to build an integrated manufacturing base, with an estimated annual output value of 5 billion yuan after delivery. According to the company announcement, as of April 26, 2023, the company has a fixed target of about 13.5 billion yuan. The subsequent conversion of fixed points into revenue is expected to support the company's long-term steady growth.

Risk factors: the risk of increased competition in the industry; the risk of targeted transformation of performance falling short of expectations; progress in expanding new customers fell short of expectations; joint venture subsidiaries with downstream screen manufacturers performed less than expected; the release of new production line production capacity fell short of expectations; and the development of the automotive industry fell short of expectations.

Investment advice: The company is a pioneer in the automotive display industry. The initial business is positioned as a Tier 2 service provider, and downstream customers are rich in resources. Currently, the industry is showing two major trends: first, the trend of large screens, and high-definition smart cockpits is expected to drive the volume and price of the automotive display industry to rise three times, and bicycle ASP to continue to rise, thus driving the continuous growth of the industry market size. According to KPMG's forecast, China's automotive display market size will increase from 64.9 billion yuan in 2022 to 106.4 billion yuan in 2026, corresponding to a 13% CAGR; second, the “screen separation” trend is showing. The company is currently taking the lead in establishing a joint venture with upstream panel manufacturers JD and Shentianma in the automotive display industry. type Tier 1 suppliers connect directly with automakers, complete the entire process from customization, development, and integration to integrated production, reduce intermediate links, reduce costs, increase profitability levels, and thereby increase supply share among automakers. We believe that the company currently has four major advantages: first-mover advantage, resource advantage, cost advantage, and customer advantage. The company's fixed target of 13.5 billion yuan is expected to support the company's steady growth. We forecast the company's EPS for 2023/24/25 to be -0.16/0.55/0.95 yuan, respectively. Considering that the company's transformation into Tier 1 suppliers has yet to be further verified and that there is still some uncertainty about when the company will land at a fixed point, the target price and rating will not be given yet.