Company profile

The company is a leading domestic display control manufacturer. Using LED display control systems as the foundation, the company has expanded into broadcasting fields such as video processing systems and cloud-based information publishing and management systems to provide comprehensive software and hardware solutions for display solutions. Listed on GEM on February 8, '24, at an issue price of 126.89 yuan/share. According to the announcement, 24Q1 is expected to achieve revenue of 7-750 million yuan, an increase of 26%-35%; net profit to mother is 120-150 million yuan, an increase of 41.52%-76.90%.

Investment logic

The company has a leading position in the industry and has advantages in algorithm technology, customer resources, and sales service.

The display control industry has high barriers, and the company is in a leading position in the control system segment to further deploy video processing equipment. With software algorithm technology as its core competitiveness, the company actively promotes technological product upgrades and iterations, in line with MLED and 4K/8K industry trends. With this, the company has a leading share among many downstream customers, and has established deep cooperative relationships with Riyadh, Zhou Ming, Abison, Haikang, Dahua, etc., and the customer resources are stable and high-quality.

Display control system: small-pitch penetration & high-definition upgrade & application scenario expansion drive growth. 1) MINI/MICRO display technology has been upgraded, COB/MIP and other technologies have increased yield and cost, accelerated penetration in scale, and smaller chips and smaller spacing drive an increase in the number of pixels, and sales demand for display control products is expected to increase. 2) High-definition 4K/8K video drives an increase in pixel density. On the one hand, it promotes the upgrading of display control products to improve ASP, and on the other hand, it increases the demand for product quantity under limited load capacity. 3) Expansion of application scenarios such as XR/virtual shooting/naked eye 3D to cover a wider range of scenarios and accelerate penetration into emerging markets such as commercial and civilian use.

Video processing equipment: collaborative display control system, MLED, high-definition and other upgraded drivers.

The development of the ultra-high-definition information industry accelerates the upgrading of video processing equipment; the company's video processing system business volume is increasing year by year, and the video processing equipment+transmission card 2-in-1 product is expanding smoothly, driving the volume and price of products to rise sharply. In the future, it will accelerate its penetration into the video equipment market. It is estimated that the revenue scale of this business will reach 1.9, 2.8, and 4 billion yuan in 24-26, increasing 52%, 48%, and 43% over the same period.

IPO project: enhance the level of technology research and development, and broaden the reach of product sales. The company issued 12.84 million shares in its IPO to raise 1,629 billion yuan. The fund-raising projects include the Nova Optoelectronic Display System Industrial Research and Development Base, the Ultra HD Display Control and Video Processing Technology Center, the upgrading of the information system, and the upgrading of the marketing network and service system.

Profit forecasts, valuations, and ratings

It is predicted that in 2024-2026, the company will achieve net profit of 882, 12.77, and 1,764 billion yuan, respectively, or +45.11%, 44.74%, and 38.20% year-on-year. We give the company a 33-fold PE valuation in 2024, with a target market value of 29.105 billion yuan. The corresponding target price is 566.68 yuan/share, giving a purchase rating for the first time coverage.

Risk warning

Demand recovery fell short of expectations; overseas progress fell short of expectations; R&D fell short of expectations; risk of increased competition; risk of lifting the ban on restricted stocks.