Company Overview: Domestic display control system leader, rich product matrix covering thousands of customers. The company was founded in Xi'an in 2008. The company focuses on the research and application of video and display control core algorithms, providing users with comprehensive solutions for specialized software and hardware, while actively expanding the new business of display chips and testing equipment, serving more than 4,000 customers around the world. The main customers cover LED industry leaders such as Liard, Zhouming Technology, Abison, Lianjian Optoelectronics, Shanxi Hi-Tech, etc., as well as leading security industry leaders such as Hikvision and Dahua Co., Ltd., as well as display leaders such as BOE and Zhaochi Crystal Display, and signed strategic cooperation agreements with Zhaochi Crystal Display. The company's revenue grew from 985 million yuan in 2020 to 2,174 billion yuan in 2022, and the revenue CAGR reached 48.56% in the past three years. From January to September 2023, we achieved revenue of 2.144 billion yuan, an increase of 40.30% over the previous year, and the overall business level continued to improve.
Industry analysis: Technological iteration leads the rapid development of the industry. The company's industry segment belongs to the video image display control industry. It is closely related to the development of the LED display industry. Along with the transfer of LED production capacity and the rapid development of the cultural industry, demand in various domestic downstream application markets is rapidly expanding. As MLED technology continues to mature and be applied, new LED display application scenarios will continue to emerge. According to the prospectus data, the domestic LED display market reached 57.6 billion yuan in 2021, and the Institute of Advanced Industrial Research expects the LED display market to continue to grow to 82.5 billion yuan in 2025.
Company analysis: Focus on “technology driven+demand traction” to continue to broaden profit growth points. The company is committed to becoming the world's leading provider of comprehensive video solutions. The company is deeply involved in the new display business. Relying on the advantages of algorithms, the company gradually formed the layout of the three strong core businesses of display control/video processing/cloud services+two major expansion businesses, further enriching the product line and further expanding its market share in response to customer needs.
At the same time, the company will keep an eye on developing forward-looking new technologies at the cutting edge of technology, develop new products with innovative technology in line with customer needs, and continue to advance the leapfrog development of related industries.
Reasonable valuation range: The company's fair value range for the next 6 months is 5,562-6.489 billion yuan? The company's net profit due to mother for 2023-2025 is estimated to be 618 million yuan, 953 million yuan and 1,379 million yuan respectively, with year-on-year growth rates of 100.7%, 54.2% and 44.7%, respectively. According to the Securities Regulatory Commission's “Industry Classification Guidelines for Listed Companies” (revised in 2012), the company's industry is computer, communications and other electronic equipment manufacturing (C39). As of January 9, 2024, the average static price-earnings ratio for the industry in the last month issued by China Securities Index Co., Ltd. was 31.84 times. Considering the company's product technology advantages and future growth trends, combined with comparable company data, and comprehensively considering relative valuation and absolute valuation, we believe that the reasonable market value of the company after the IPO was issued is in the range of 5562-6.489 billion yuan, corresponding to a reasonable value range of 108.29-126.34 yuan/share per share. Assuming that no over-allotment option is used, based on the 2022 audited net profit of 308 million yuan, the corresponding PE range is 18-21 times; based on the 2022 audited net profit of 297 million yuan, the corresponding PE range is 19-22 times; based on the 2023 forecast net profit of 618 million yuan, the corresponding PE range is 9-10.5 times.
Risk warning: Risk of valuation changes due to changes in key assumptions, risk of declining operating income, risk of fluctuations in the secondary market, risk that the company's price-earnings ratio is significantly higher than the industry average, risk of demand fluctuations, raw material supply risk, inventory impairment risk, risk of falling gross margin, risk of management and internal control failure after continuous expansion of the company's size, risk that fund-raising projects will not obtain expected returns, etc.