Event: The company released its 2023 performance forecast. It is expected to achieve revenue of 951-1,087 million yuan in 2023, an increase of 40%-60%; achieve net profit of 1.97-223 million yuan, an increase of 50-70% over the previous year; and achieve net profit after deducting non-return to mother of 1.66-189 million yuan, an increase of 40%-60% over the previous year.

The increase in LED display control application scenarios has led to an increase in downstream demand, and the overseas layout has achieved remarkable results: in 2023, the company's operating income, gross profit margin, and net profit level have all improved significantly, mainly due to the company's active layout in the domestic market and effective promotion in foreign markets. (1) In the domestic market, the application scenarios of the LED display control industry are increasing. The company's core products have increased as the number of downstream shipments has increased, and the revenue growth rate is obvious. (2) In terms of overseas markets, in 2023, the company participated in large-scale exhibition events such as ISE 2023 Barcelona, Spain, the 2023 Las Vegas Radio and Television Show (NAB), and the 2023 International Smart Display and System Integration Exhibition (ISLE), and held large-scale product promotion conferences in Dubai, Malaysia, etc., which attracted many international customers to negotiate and sign contracts with the company. At the same time, the company's high-quality, high-performance video processing equipment has a competitive advantage in overseas markets. In 2023, the company increased the construction of marketing outlets in North America and Europe, improved pre-sales and after-sales services, expanded the coverage of high-end products in overseas markets, increased the overall gross profit margin of the company's products, and the revenue growth rate was impressive. (3) The company's non-recurring revenue in 2023 is estimated to be about 20 million to 30 million, mainly financial income and government subsidies.

The repurchase and non-reduction commitment shows confidence in the company's development: On January 23, 2024, the company issued an announcement regarding the voluntary commitment of shareholders, directors and senior management holding 5% or more of the company's shares. Anwar Chuanglian, Jiahe Ruixin, Ms. Deng Lingling, and Mr. He Zhimin promised not to reduce their direct holdings of the company's shares from January 23, 2024 to November 30, 2025. The number of shares that promised not to reduce their holdings accounted for 35.21% of the company's tradable shares under unlimited sales conditions at the time. On December 5, 2023, the company issued a repurchase announcement. The company will repurchase some of the company's shares through centralized bidding transactions, all of which will be used for employee stock ownership plans or equity incentive plans at an appropriate time in the future. The repurchase amount will not be less than RMB 30 million (inclusive) and no more than RMB 50 million (inclusive), and the repurchase price will not exceed 150% of the average trading price of the company's shares in the 30 trading days before the board of directors passed the share repurchase decision.

Profit forecast, valuation and rating: Considering that the domestic LED industry will take time to recover and climb, the 23-25 revenue forecast was lowered to 10.08/14.41/19.99 billion yuan, -4%/-8%/-14% compared to the previous forecast, and the 23-25 net profit forecast was lowered to 2.09/3.16/479 million yuan, compared to the previous forecast -11%/-13%/-15%, corresponding to the 23-25 PE competition pattern. The gross margin is rising steadily. With the increase in high-definition video and the expansion of application scenarios such as virtual shooting and AR/VR, the company is expected to further open up room for growth and maintain a “buy” rating.

Risk warning: Domestic demand falls short of expectations; competition in overseas markets intensifies.