Core views

The company plans to transfer 51% of its wholly-owned subsidiary Hong Kong Guangfeng to LONG PINE. Through this move, the company will divest GDC assets and greatly reduce the risk that GDC will adversely affect the company's business performance. The Wenjie M9, which is equipped with the company's projection screen, sold well after launch. Currently, it has broken 70,000 units, and it is expected that many models will continue to be launched in the second half of the year. The automotive business is expected to contribute 4-5 billion yuan to the company's additional revenue in 2024, and is expected to increase to 1.2 billion yuan in 2025. By the end of 2023, Fengmi Technology has completed management and business line adjustments, and the period expenses have been controlled and optimized. It is expected that in 2024, Fengmi Technology will drastically reduce losses, and the corresponding company's 2C business losses will be drastically narrowed.

Furthermore, the cinema market recovered well. The domestic box office in Q1 increased 3% year-on-year, and the Qingming box office reached a record high of 823 million yuan. The company's operating rate is expected to increase drastically, driving steady revenue growth in the cinema sector and consolidating the basic performance market. Optimistic about the company's long-term growth and maintaining a “buy” rating.

occurrences

On the evening of April 12, the “Notice Concerning the Transfer of Part of the Subsidiary's Shares and Related Transactions” was issued: The company plans to transfer 51% of the shares of the wholly-owned subsidiary Hong Kong Guangfeng to LONGPINE, with the aim of reducing the adverse impact of GDC held indirectly through Hong Kong Guangfeng on the company's business performance. After the transfer was completed, the company's indirect shareholding ratio in GDC was changed to 22%. Furthermore, LONG PINE is a wholly-owned subsidiary of LONGPINES FINANCIAL, a 100% shareholding company with the actual controller of the company, so LONGPINE is an enterprise that is indirectly controlled by the actual controller of the company.

Brief review

Divestment of part of GDC's shares reduces its drag on the performance of listed companies

Previously, Hong Kong Guangfeng, a wholly-owned subsidiary of the company, held 44% of GDC's shares. After an arbitration dispute between the two parties occurred in 2021, GDC's operating income continued to decline in 2022 and 2023, with net profit losses of 14.34 million yuan and 26.9 million yuan, respectively, hampering the performance of listed companies, and there is a risk of continued loss in GDC operations. Therefore, the company plans to transfer 51% of the shares in Hong Kong Guangfeng, a wholly-owned subsidiary, to LONG PINE, which is indirectly controlled by the actual controller of the company. Equity. The company divested GDC assets. After completing the transfer, the company's indirect shareholding ratio in GDC was reduced to 22%, which can greatly reduce the risk that GDC will adversely affect the company's business performance.

The price of this transaction is about US$1.01 million. The cash obtained from the company's equity transfer will help optimize the company's asset structure. In the future, the cash obtained can be further invested in the growth business, accelerate the company's business layout and development in the automotive sector, which is in line with the company's long-term interests.

The Quanjie M9 is expected to break 70,000, and is expected to continue to launch a variety of models in the second half of the year. The company's in-vehicle business revenue exploded after the launch. Currently, Dading has broken 70,000 units. Of these, the Ultra version comes with a projection screen provided by the company as standard. Assuming that the company's product is worth 5,000 yuan in bicycles, and assuming that the M9 sells 100,000 units throughout the year, then the automotive business is expected to contribute 4-5 billion yuan to the company's additional revenue in 2024. Previously, the company had already relied on the three major products of cockpit displays, laser lights, and AR-HUD to successively receive targets from car companies such as Cyrus, BYD, an international car company, and BAIC New Energy. It is expected that it will continue to launch various models in the second half of the year. Furthermore, the M9 is the first model equipped with the company's in-vehicle products. Its advertising effect helped promote the company's automotive products to more car companies. At the same time, the company has also accumulated rich experience in mass production, and the company is expected to add targets for more car companies. Looking ahead to 2025, the M9 will continue to sell and add the contributions of several newly launched models. It is estimated that the annual vehicle business will contribute 1.2 billion yuan in revenue. As new energy vehicles continue to boom and the company's targeted projects are gradually implemented, the company's automotive business will also be in a rapid growth channel over a longer period of time.

After the adjustment, Fengmi Technology's business is expected to achieve significant loss reduction. Steady growth in the cinema market consolidates the company's 2C business. Large losses in 2023 dragged down the company's performance. By the end of 2023, Fengmi Technology had completed management and business line adjustments, and controlled and optimized period expenses, such as reducing product types and focusing on its own more competitive Xiaoming brand, while continuing to implement the DLP+LCD dual technology route and expand the advantages of Google TV+Netflix dual certification Overseas markets have now obtained the first OEM business from Xiaomi's overseas LCD business. Under comprehensive influence, Fengmi Technology is expected to achieve a significant loss reduction in 2024, and the corresponding company's 2C business losses will narrow drastically. Furthermore, the cinema market recovered well. The domestic box office in Q1 increased 3% year-on-year, and the Qingming box office reached a record high of 823 million yuan. The company's operating rate is expected to increase drastically, driving steady revenue growth in the cinema sector and consolidating the basic performance market.

Profit forecasting and investment advice

Considering that the company's automotive business ushered in a phase of explosive growth, as well as losses in the 2C business and steady growth in the cinema market, the company's revenue for 2023-2025 is estimated to be 22.17, 29.84, and 4.104 billion yuan respectively, with year-on-year increases of -12.76%, 34.59%, and 37.53%, respectively. Net profit to mother is 1.02, 2.07, and 419 million yuan respectively, up -14.76%, 103.42%, and 102.30%. The PE corresponding to the current market value is 89, 44, and 22 times, respectively. Considering that the compound net profit growth rate of the company is expected to exceed 100% in the next two years, and the automotive business will usher in explosive growth, we are optimistic about the company's long-term growth in the laser display field and maintain a “buy” rating.