Reshape the LED display control pattern and create the future of MLED display control. The global leader in LED display control systems, focusing on video and display control algorithms, is widely used in LED displays such as small-pitch conferences, advertising media, stage entertainment, etc. Accelerating the global layout, overseas revenue CAGR for 2020-2022 was 83.4%. The company is in the middle of the ultra-high-definition industry, relying on product performance and service advantages to reshape the industry pattern and extend to video systems; forward-looking layout of MLED control and interface chips, as well as correction and inspection systems, to explore the core value of the industrial chain.

LED displays point to the 100 billion market, and demand for midstream display control systems is expanding. The LED industry follows the “Hayes Law”, that is, light efficiency increases 20 times and costs are reduced by 90% every ten years. As the LED chip manufacturing and packaging industry matures, the industrial chain continues to reduce costs, large LED screens evolve to small spacing, Mini/Micro LED display application scenarios expand at an accelerated pace, and LED displays point to the 100 billion market. 4K/8K ultra-high definition drives pixel output. The value of the display control system is linearly correlated with the number of pixels, so we expect the CAGR of the display control system market to be higher than 20% in 2021-2026.

Industrial trends at home and abroad resonate, and leading domestic video display control equipment manufacturers are welcoming new opportunities. China is gradually upgrading from a global LED “manufacturing center” to a “technology center”. Domestic display control manufacturers continue to accumulate video signal processing know-how, overtaking overseas leaders such as Barco and Extron in terms of performance and cost performance. According to the official websites of various companies and our estimates, the global video equipment market is about 30 billion yuan. The global market share of the company's display control systems is about 51% (2022), while video equipment is only 3.4% (2023), so there is plenty of room to replace video equipment. With the domestic LED display control leader changing hands, the “double oligopoly” pattern between the company and Carlette was basically formed. Thanks to the strong adhesiveness of the display control system, it quickly penetrated the video equipment market, and its market share continued to increase.

Focusing on core video and display control algorithms, the product matrix continues to expand. The display control system continues to be upgraded and iterated. With the promotion of MLED displays, the market share of high-end products is expected to increase; “2 in 1” video equipment is bundled and sold, and overseas replacement is achieved through cost-effective entry into high-end overseas markets; cloud network players and cloud services achieve centralized control of LED screens, as well as multi-screen, multi-service, and cross-regional information release; core inspection equipment helps screen manufacturers achieve large-scale, standardized manufacturing and testing of MLED displays; launched the industry's first display ASIC control chip, taking into account power consumption and cost, to help MLED displays enter consumption In the field, we expect the company's chip business to reach a revenue scale of more than 500 million yuan by 2026.

Investment suggestions: The company is deeply involved in the field of MLED video image display control, using the high adhesive card positions of display control systems and screen manufacturers, and the cost-effective advantages of going overseas to accelerate the release of high-margin video equipment products; forward-looking layout of MLED inspection equipment and chips to explore the core value of the entire industry chain. We predict that the company will achieve revenue of 30.54, 41.47, and 5.727 billion yuan in 2023-2025, and achieve net profit of 6.08, 8.89, and 1,310 million yuan, corresponding to PE of 42x, 29x, and 19x. For the first time, we covered it and gave it an “increase in wealth” rating.

Risk warning: MLED industry development falls short of expectations; video equipment falling short of expectations; risk of macroeconomic fluctuations; risk of lifting the ban on restricted stocks