An important mask company, and there is huge room for domestic replacement: the company is one of the earliest manufacturers of mask plates for the tablet display, semiconductor chip, touch, circuit board and other industries established in China. The products focus on low-temperature polysilicon (LTPS), metal oxide (IGZO), active matrix organic light-emitting diodes (AMOLED), microLED displays, micro OLED displays, semiconductor chips, Chiplet advanced packaging technology, etc., to provide customers with a diverse range of flat panel displays and mask versions for semiconductor chips. The mask plate is a graphic transfer master plate in the microelectronics manufacturing process. It is an important key material in the manufacturing process of flat panel displays, semiconductors, touch controls, circuit boards, etc.

The function of the mask version is to transfer the designer's circuit graphics to substrates or wafers in the downstream industry through exposure, so as to achieve mass production. As a benchmark and blueprint for photolithography, the mask version is the key to connecting industrial design and process manufacturing. The accuracy and quality level of the mask version directly affects the high yield of the final downstream product. In downstream applications of the mask version, semiconductors and flat panel displays are the two most important application areas of the mask version. Production lines of the same generation in the field of flat panel displays have different requirements for major technical indicators such as resolution and size according to the requirements of downstream display products, and in turn, there are also high, medium, and low differences in mask accuracy requirements. Demand for masking products in mainland China's flat panel display industry will continue to grow, especially for high-generation, high-precision masking products.

According to Omdia's analysis, it is estimated that in 2026, the global panel display industry's sales revenue of mask plates will be 111.2 billion yen, accounting for 92% of the global flat panel display industry's mask sales. Demand for masking plates in the 8.6 generation and below flat panel display industry will continue to grow steadily. According to Omdia analysis, mainland China's flat panel display industry accounts for global demand for mask versions, rising from 32% in 2017 to 51% in 2021. In the future, as related industries move further domestically, demand for mask versions in mainland China's flat panel display industry will continue to rise. It is estimated that by 2025, mainland China's flat panel display industry will account for 58% of global demand for mask plates. In the field of semiconductor chip mask versions, the increase in demand for semiconductor chips is the main factor driving the growth of the semiconductor chip mask version market. According to SEMI's 2022 analysis report, the global semiconductor chip mask market is about 5.2 billion US dollars in 2022, and the market size is expected to reach 5.4 billion US dollars in 2023, an increase of 4% over the previous year. Benefiting from the rapid development of semiconductor chip manufacturing in mainland China, the size of the semiconductor chip mask market in mainland China is growing rapidly.

Based on the flat panel display industry, a fixed increase plan was issued to promote the continuous upgrading of display and semiconductor mask products: the mask products produced by the company can be mainly divided into quartz mask versions, soda mask versions, and others (including letterpress and film) according to different substrate materials. Mask versions for the flat panel display industry include thin-film transistor liquid crystal display (TFT-LCD) mask version with array (array) mask (a-Si/LTPS technology) and color filter (CF) mask version, active matrix organic light-emitting diode display (AMOLED) mask version, ultra-distorted linear liquid crystal display (STN-LCD) mask version, and fine metal mask version, microLED display mask version, and micro OLED display mask version, etc. The company's flat panel display mask products and technology are well known in the industry, and it has cooperated with major domestic flat panel manufacturers. Typical customers served include BOE, Huaxing Optoelectronics, Tianma, Vicino, Xinli, Longteng Optoelectronics, Hehui Optoelectronics, Innolux Optoelectronics, and Hanyu Caijing. On December 5, 2023, the company announced the “Plan for Issuing A Shares to Specific Targets in 2023". The total amount of capital raised to issue shares to specific targets is no more than 120,000,000 yuan (including the number of copies). After deducting the relevant issuance fees, the funds raised will be used for the production of high-precision mask plates and high-end semiconductor mask plates. The “High-precision Mask Plate Production Base Construction Project Phase 1” mainly produces 8.6 generation and below high-precision mask plates, used in a-SI, LTPS, AMOLED, LTPO, MicroLED, etc. Flat panel display mask version product. The “High-end Semiconductor Mask Production Base Construction Project Phase I”. The main product is a high-end semiconductor mask version covering the 250nm-65nm process. The construction and implementation of this project can achieve the development and industrialization of high-end semiconductor mask versions at higher process nodes, further breaking the monopoly pattern of leading overseas manufacturers, improving the country's localization process and autonomous controllability in the semiconductor industry chain, and can also expand the company's product types and enhance the competitiveness of the company's products, further increasing the company's leading edge in this field.

Investment suggestions: We predict that in 2023-2025, the company will achieve revenue of 939 million yuan, 1,159 million yuan, and 23.32 billion yuan, respectively, with year-on-year growth rates of 23.2%, 23.4%, and 23.6% respectively, achieving net profit to mother of 135 million yuan, 179 million yuan, and 230 million yuan respectively. The year-on-year growth rates are 36.0%, 32.6%, and 28.7%, respectively. Corresponding PE is 39.5 times, 29.8 times, and 23.1 times, respectively. Considering the company's large market space, the company will continue to promote product upgrades. The release of fixed real estate production capacity in the future is expected to bring about a new round of performance growth. For the first time, coverage will be provided, and a proposal to increase holdings will be given.

Risk warning: Downstream demand is sluggish, industry competition intensifies, product upgrades fall short of expectations, fixed growth falls short of expectations