Event Overview: Skyworth's PANCAKE 2 will debut at CES from January 9 to 12, 2024. PANCAKE 2 uses an mRico-OLED screen and has monocular 4K resolution.

Apple MR products are about to be sold, and the XR industry has ushered in major development opportunities.

Apple will release the first MR headset with breakthrough features at the beginning of the year. Using core technologies such as Pancake optical solutions and 4K silicon-based OLED display screens, it is expected to fully drive industry demand and push XR headsets from commercial products to consumer products. According to MordorIntelligence, the global XR market will reach 34.94% CAGR in 23-28.

The company PANCAKE2 will soon debut at CES, equipped with VST and 4K silicon-based OLED screens, leading the industry in many configurations.

On January 8, the company said on the investor interactive platform that it will exhibit Skyworth's PANCAKE 2 and PANCAKE 1 MR headsets and A1 AR glasses products during the CES exhibition in the US from January 9 to January 12, 2024. Among them, PANCAKE 2 debuted. The product is equipped with dual 4K micro-OLED screens with a resolution of 3552×3840×2. The main processing chip is Qualcomm XR2, with two 16 million RGB cameras on the front, while existing VR/MR devices basically use 1 RGB camera. The product has VST capabilities and is equipped with functions such as gesture tracking. The VST perspective effect that users can experience is close to the real world, which is generally consistent with the technology path adopted by Apple. The company's Pancake optical solution uses a multi-lens combination method to meet focusing needs. It supports 0 to 500 degrees (0D~-5D) myopia refractive index adjustment, which can cover the adjustment needs of the vast majority of myopic users, and can use VR/MR without glasses. The company has provided a more mature solution in terms of visual interaction. The products are differentiated, and the advantages of lightness and lightness are obvious.

By breaking through 2B and actively deploying 2C, the company is expected to fully benefit from the development of the XR industry.

The overseas 2B market for the company's XR products is mainly used in education, training, medical care, etc., and actively lays out the 2C market around the “OTT+AR” product form. The new PANCAKE 2 MR product will first serve the overseas B-side industry solution market, focusing on expanding XR industry application customers in Japan, the United States, South Korea, India, etc., and reached a strategic cooperation with an Indian customer to provide MR product and equipment customization services in June 23. In addition, the company has accumulated experience in the AR field. The company is cooperating with overseas customers to develop light-interactive AR glasses to achieve basic functional interaction through a combination of AI and AR. The core hardware of the company's XR products cooperates with global industrial chain companies, and the product company develops its own products and produces the complete machine products themselves. The company has its own factories in Bao'an District of Shenzhen and Zhongkai High-tech Zone in Huizhou. It has a complete manufacturing system, which can achieve mass production of XR all-in-one machines and mass shipment and supply of products. The company is expected to benefit from industry development opportunities and open up the company's growth curve.

Investment advice: We believe that with the promotion of products such as Apple headsets, MR related application scenarios will gradually become richer, headsets will gradually move from commercial products to consumer products, and the company is expected to be the first to benefit as one of the leaders in the XR industry. The company's net profit for 2023-2025 is estimated to be 881/1,158,101 billion yuan, respectively, and the corresponding PE multiples are 18x/14x/11x. Maintain a “Recommended” rating.

Risk warning: Competition in the XR market intensifies; downstream demand falls short of expectations, etc.