The leading domestic display control system equipment and solution provider maintains a “buy” rating. We maintain the company's 2024-2026 net profit forecast of 1.30, 1.72, and 224 million yuan, and EPS of 0.64, 0.85, and 1.11 yuan/share, respectively. The current stock price corresponds to PE 46.4, 34.9, and 26.8 times, respectively. Considering the company's good card position in the field of AI computing, we maintain a “buy” rating.
Net profit growth rate exceeded expectations, and profitability improved markedly
The company released its 2024 quarterly report. In Q1, it achieved operating income of 74.791 million yuan, an increase of 3.74% over the previous year; realized net profit of 5.9912 million yuan, turning a year-on-year loss into a profit. If the impact of incentive expenses is taken into account, actual profit is better than apparent. The company's gross sales margin was 55.50%, a sharp increase of 14.63 percentage points over the previous year, and profitability improved markedly. The company's operating quality has improved. The sales expense ratio, management expense ratio, and R&D expense ratio were 20.69%, 14.10%, and 21.81%, respectively, down 1.56, 0.46, and 0.40 percentage points from the previous year.
We have established cooperation with Company N, an internationally renowned AI computing leader, to open up broad growth space. The company has established a business partnership with N Company, an internationally renowned leader in graphics technology and artificial intelligence computing. The company has obtained Company N's Vendor Code. After obtaining the Vendor Code, it is eligible to directly supply to Company N and continue to expand new businesses. The business connected between the company and Company N is mainly a testing and testing platform for various products. The products currently connected include: liquid cooling test platforms, AI-based testing platforms, various test boards, etc. With the expansion of the supply scale and the introduction of new businesses, the company's long-term growth space has been further opened up.
Three chip products were successfully launched to further expand its technological leadership. In April 2024, the company held a new product launch conference to launch three chips: “Coollights Hanshuo LDV4045 Chip”, “Zeus Zeus Zeus0108 Chip”, and “Thor Thor Thor Ulc32A Chip”. Among them, CoolLights Han Shuo is the world's first LED “ALL IN ONE” integrated chip, Zeus ZEUS is a domestic ASIC professional audio and video chip, and Thor is a human-computer interactive display chip. The successive introduction of new products is conducive to expanding the company's technological leadership in the industry.
Risk warning: risk of increasing raw material procurement costs; intensification of industry competition; risk of brain drain.