Key points of investment

Dual drive for materials and equipment, double increase in revenue and profit

The company released the 2023 performance report. In 2023, it achieved revenue of 517 million yuan, an increase of 12.73% year on year; net profit to mother was 123 million yuan, an increase of 8.88% year on year. During the reporting period, the company was deeply involved in the field of OLED materials and equipment, and achieved a double increase in operating profit.

The increase in domestic OLED panel demand in 2023 will drive an increase in utilization rate

The recovery of the downstream mobile phone market in 2023, combined with the increase in the penetration rate of OLED panels in various market segments, led to a surge in OLED demand. According to Omdia data, the flexible OLED operating rate increased from about 50% to 70% in the first half of 2023. As a domestic replacement core company in the OLED industry chain, the company is deeply involved in the field of OLED materials and equipment, and is expected to fully benefit from the expansion of domestic OLED production capacity. Along with the continuous increase in the localization rate, the company's performance is expected to continue to grow.

The expansion of AMOLED 8-generation production is driving demand for equipment, and the company's active layout is expected to provide increased performance

BOE announced an investment of 63 billion yuan to build an 8.6-generation AMOLED production line in November 2023. Major panel manufacturers are expected to actively follow up, greatly boosting the purchase demand for evaporation source equipment. At the same time, the value of 8-generation evaporation sources is expected to increase significantly compared to the 6th generation. The company's evaporation source matches the Japanese Canon Tokki evaporator and has a high share in the domestic 6th generation AMOLED production line. On this basis, the company's 8th generation evaporation source equipment is building a testing and production platform. It is recommended to actively monitor the progress of subsequent tenders.

The materials business continues to expand, and category customers expand

In the past two years, the company's materials business has mainly focused on Prime materials. R' and G' materials have been mass-produced and supplied by downstream panel manufacturers, and B' materials have passed most R&D verifications. H2 packaging materials were gradually released in 23 years, and PDL materials are being verified by leading panel companies. In addition, the company disclosed in September 2023 that some materials are currently being tested by BOE. As new customers and new products continue to expand, the company's materials business is expected to continue to expand in the future.

Profit forecasting

We expect the company's 2023-2025 revenue to be $517/7.81/1,233 billion, respectively, up 12.73%/51.06%/57.75%; net profit to mother for 2023-2025 is estimated to be $123/1.93/297 million, respectively, with year-on-year growth rates of 8.88%/56.77%/53.75%, respectively. EPS in 2023-2025 was 0.85/1.30/2.00 yuan, respectively, and the corresponding PE was 39/25/16 times, respectively. Considering the acceleration of the company's domestic replacement process for organic light-emitting materials and the company's leading position in the field of evaporation source equipment, the “buy” rating was maintained.

Risk warning

R&D progress falls short of expectations. Evaporation source products are only suitable for Tokki evaporation machines, and some raw materials for evaporation source products are imported