Changxin Technology specializes in R&D, production, sales and service of key basic materials and devices in flat panel display devices. Its products include ITO transparent conductive glass, touch sensors and modules, TFT-LCD panel thinning, and high-end mobile phone LCM LCD modules. Currently, the company's thinning business scale ranks first in the country, and the comprehensive strength of in-vehicle touch display modules ranks among the highest in the country.

According to the company's performance forecast, due to factors such as falling demand in the consumer electronics market in 23, the company was greatly affected by exchange rate fluctuations and maintaining high R&D investment, and fierce market competition, etc., the net profit to the mother was 238-355 million yuan in 23, a year-on-year decrease of 48%-65%, and realized deduction of non-net profit of 198-295 million yuan, a year-on-year decrease of 52%-68%.

Opinion update:

Actively deploy VR and wearables to contribute to growth momentum. Through the AOI camera automatic visual inspection technology developed by the company itself, the AOI CCD pixel reached 120M to achieve virtual brightness comparison detection and control of 0.07mm automatic recognition of 3D glasses. The company closely follows the development trend and trend of VR headsets based on the Quest2 technology path and form. Relying on the equipment, technology, technology and talent advantages accumulated in the field of display modules, the company is providing Quest 3 VR headset module products to North American VR flagship customers, and is speeding up the development of high-generation VR headsets equipped with microLEDs on this basis.

The automotive electronics business segment has obvious advantages. In this business segment, the company not only covers key components such as customer vehicle sensors, vehicle sensor modules, vehicle covers (2D and 3D), and vehicle display modules, but also provides customers with integrated vehicle touch display module packaging services. In recent years, the company launched a vehicle screen module business equipped with a 3D curved vehicle cover to help the car terminal cockpit have a better integrated display effect. Through hot pressing molding, flat glass is processed into curved glass in different shapes such as V, C, S, L, U, W, etc., and a complete vehicle 3D cover is manufactured through curved surface printing technology. The company has now mastered automotive HUD curved mirror technology and has tested production in small batches. Currently, it is planning a production workshop for mass production of HUD products in an effort to accelerate the efficiency transformation of related projects and strive to form new profit growth points as soon as possible.

Profit forecast, valuation and rating: Considering the decline in the company's downstream industry sentiment in '23, the company's downstream sentiment is expected to improve marginally in '24, we lowered the company's net profit forecast for 23-24 to 307 million yuan/533 million yuan (the original forecast values were 11.79/1,416 billion yuan, respectively, with a reduction ratio of 73.98%/62.33%, respectively), and added a 25-year net profit forecast of 721 million yuan. We are optimistic about the company's VR, automotive electronics, and 17 times PE valuations, respectively. The long-term development potential of businesses such as UTG maintains a “buy” rating.

Risk warning: Downstream demand falls short of expectations, risk of new product development or customer introduction falling short of expectations, increased risk of industry competition, risk of fluctuations in upstream raw material prices, risk of exchange rate fluctuations, risk of macroeconomic fluctuations.