Key points of investment

The penetration rate of high-end displays has increased, and the new packaging technology has opened up room for the company's LED business to grow. In the mini/microLED field, the company has become a leading enterprise in the industry with full process flow, full product form, wide application coverage, and comprehensive production capacity. Since starting pre-research on micro-spacing projects, the company has continued to focus on technological innovation and product development and iteration. The company firmly chose the technical path where COB and MIP packaging methods go hand in hand, and is equipped with the company's unique UIV image quality engine and self-developed control system. Overall, it has excellent performance in terms of display effect, lamp surface temperature increase, contrast, flatness, and ink color consistency. The screen's energy saving has been increased by 50%, and the reliability of the lamp beads has increased tenfold. In terms of Mini/Micro LED product layout: Zhouming's UMini series products P0.4, P0.6, P0.7, P0.9, P1.1, P1.2, P1.5, and P1.8 have achieved mass production on a large scale, have a competitive cost advantage, and UMini has formed mass sales; currently, P0.4 Micro products have been officially released and have mass production capacity.

Compared with traditional LEDs, Mini/Micro LEDs have the advantages of high contrast, wide color gamut, high brightness, low power consumption, long life, and short response time. The industry continues to increase investment in Mini/Micro LED. As large-scale production in the supply chain, process yield improvement, and COB and MIP packaging technology continue to mature, the technology of Mini/Micro LED products is gradually improving, and the cost is steadily declining. Mini/Micro LED will usher in a new stage of development, opening up a broad market space. The gradual increase in the cost performance ratio of Mini/Micro LED products is conducive to increasing the penetration of Mini/Micro LED in the field of commercial display and expanding application scenarios such as home TVs and cinemas. At the same time, the maturity of Micro LED technology has given LED displays an opportunity to enter the consumer market, bringing about new levels of growth in output value, and driving the continuous prosperity of the LED display industry with small spacing. According to GGII, the global Mini LED market will reach 5.3 billion US dollars by 2025, with a compound annual growth rate of more than 85%. By 2025, the global micro LED market will exceed 3.5 billion US dollars, and the global micro LED market is expected to exceed 10 billion US dollars in 2027. In the future, the company will comprehensively carry out COB and MIP technology routes and product layout, implementation solutions and applications, and simultaneously carry out research and development work on COG and silicon-based micro LED technology, seize cutting-edge technology development opportunities at all times, steadily increase market share, and prepare technical reserves for entering the civilian market.

Accumulate the first-mover advantage of overseas virtual studios and start the rapid growth of domestic XR application scenarios. Due to the demonstration effect brought about by the successful application of virtual shooting overseas, the domestic XR virtual shooting market is booming, expanding from film and television production to a wide range of applications in various fields such as press conferences, live broadcasts, and teaching. The company is deeply involved in the field of XR virtual shooting, and has evolved from a single hardware manufacturer that provides high-end LED displays for overseas digital studios to a comprehensive solution provider that can provide customers of all dimensions with full-process XR shooting solutions. With deep accumulation and continuous investment in the field of XR virtual shooting, the company has deep insight into customer needs and technical pain points, and lays out key technologies in advance to provide customers with XR full-process solutions covering LED display systems, screen control systems, cameras and camera tracking systems, media servers, lighting systems, and streaming systems, including movie-grade VP professional studios, medium and large XR commercial studios, and small XR commercial studios. The company used hardware and channel advantages to proactively lay out digital content and accumulated a number of high-value digital assets. In the future, the company will further increase technology research and development in the XR field, from better screens to easier to use display control systems, more efficient rendering servers, and richer and more beautiful digital content to create a low-cost, high-quality XR production platform. The construction of the XR ecosystem will bring a better user experience to customers, a better display platform for digital content developers, and better customer stickiness to the company.

LED leverages AIGC to deeply cultivate digital assets and launch a new growth model. Virtual digital people are an important direction in the company's digital asset field. The company takes the lead in arranging digital content production and IP construction based on LED application scenario requirements. From existing hardware display products, software technology self-research, and digital content accumulation, to integrated “hardware+software+content” solutions, increasing the added value of the company's products and building a new engine for the company's business development. As a professional display software developer, the company collaborated with computing power manufacturers (Nvidia) and hardware manufacturers (Dell) to complete unified product testing. It passed various compatibility and adaptability tests for Zhouming's own AIGC, broadcast control and rendering software at the Dell artificial intelligence workstation, which can ensure that workstation PCs can achieve more optimized operation results in terms of stability, fluency, and ease of use in the process of running AI and XR related professional software. Through strong alliances with leading companies in the industry, the company's virtual digital people have been fully connected to various AI tools, formed integrated solutions, and delivered to customers one after another.

Investment suggestions: We forecast that the company's operating income from 2023 to 2025 will be 73.94/85.12/9.430 billion yuan, with growth rates of 4.5%/15.1%/10.8%, respectively; net profit of 2.93/3.95/503 billion yuan, respectively, with growth rates of 359.7%/35.1%/27.2% respectively; corresponding PE 24.9/18.4/14.5 respectively. Considering that Zhouming Technology is deeply involved in the field of LED lighting and has successfully built multi-scene lighting solutions, superposition companies lead the layout in new application fields such as XR virtual shooting, LED cinema screens, and AI virtual digital people, grasp industry trends, and have broad prospects. In the future, the company will continue to cooperate with leading companies in the international cinema equipment field to further develop LED cinema displays and solutions. As the post-movie market picks up, the company is expected to usher in new performance growth points. First coverage, buy-A advice is given.

Risk warning: downstream demand falls short of expectations; new technology/product/project progress falls short of expectations; risks arising from the development of LED display technology.