Key points of investment

Improve the global sales network and continue to enrich the product portfolio, and continue the high growth trend in order signing and revenue. In 2023, the company signed tax-inclusive contracts of about 5.3 billion yuan, up about 51% year on year; operating income was about 4 billion yuan, up about 43% year on year; on top of the high increase of about 76% in 2022, overseas market revenue increased again by about 46% to reach about 2.6 billion yuan in 2023. The company's products are exported to more than 140 countries and regions, including America, Europe, Australia, Asia, and Africa. Excellent product examples include presidential press conferences, import and export fairs, World Cup, NBA games, New York Times Square, etc., and tens of thousands of application examples have been successfully implemented. According to Omdia data, the Absen brand ranked first in the 2023 global LED display brand shipment volume ranking with a market share of 16.2%. In overseas markets, Absen continued its advantages for many years and maintained its leading position in LED display brand exports.

The domestic LED display market has a large base and high penetration rate. Although there were fluctuations in 2023 due to the economic downturn, the company showed results due to its differentiated “brand machine” market positioning, and achieved domestic growth of about 38%, which is higher than that of peers. The company attaches great importance to product development, and has established a perfect R&D system and R&D team through years of hard work. From 2021 to 2023, the company invested a total of about 400 million yuan in R&D expenses, and continued to increase R&D investment in core technologies such as micro LED, virtual shooting, LED conference all-in-one, outdoor small spacing, LED fire retardant, and home cinema, which strongly supports the overall improvement of the company's product market competitiveness, and continued leadership in cutting-edge technologies such as XR virtual production, home cinema, outdoor naked eye 3D display, and micro LED. The company launched a total of 55 new products in 2023, which strongly supports growth in performance. With 2024Q1, the company achieved revenue of 864 million yuan, a year-on-year increase of 21.87%, and net profit to mother of 171 million yuan, a year-on-year decrease of 10.28%.

The global LED display market is growing steadily, and the domestic penetration rate & industry concentration are constantly increasing. According to Jibang Consulting data, the global LED display market has bottomed out and rebounded. In 2023, the global LED display market reached 7.564 billion US dollars, with a year-on-year increase in sales volume of 8%, and the sales area increased even more; continuous innovation in LED display technology promotes further diversification of LED display scenarios, and the global scale will maintain steady growth of about 10% in the next few years, and the global LED display market is expected to reach 9.815 billion US dollars in 2026. Thanks to factors such as domestic government and enterprise informatization, trade and tourism facility upgrades, etc., combined with the local advantages of the domestic LED industry chain, small spacing has become a crushing alternative to large screen technologies such as projection and LCD splicing after years of rapid development, and the penetration rate continues to increase. Statistics from various consulting agencies show that LED shows that overseas markets continue to grow steadily, Europe and the US have a higher base and steady growth rate, and emerging markets such as Southeast Asia and the Middle East are growing stronger. According to Jibang Consulting data, China's LED display market is estimated to be US$2,436 billion in 2023, accounting for 32.21% of the global scale. Dynamic changes in the global economy in recent years have accelerated the reshuffle of LED display brands. The market share of leading screen companies is gradually expanding, and the concentration of the LED display industry continues to increase. The increase in industry concentration has further consolidated the competitive advantage of leading screen companies in the market, because leading screen companies have stronger technical strength, higher quality standards, wider market channels, and stronger brand influence. As market share increases, leading screen companies can also enjoy cost advantages brought about by scale effects, further consolidating their market position.

According to expert data, the total market share of the top 5 domestic LED display companies has exceeded 50% since 2022.

The energy storage business was laid out, the smart factory production line was carried out smoothly & some projects were successfully commercially delivered. The company will also invest in setting up a new company to enter the new energy business in 2023. Abbison's new energy business entities are mainly engaged in the new energy storage business, focusing on R&D, production and sales of household energy storage and industrial and commercial energy storage products. Abison's new energy business is committed to providing customers with safe, intelligent, and sustainable green energy storage products and services. Since its establishment, Abison New Energy has always adhered to user-centered and market-oriented, strengthened technological innovation, digital intelligence, vigorously implemented intelligent strategies, integrated global resources, achieved technological and product leadership, and provided smart clean energy for households and business owners around the world. Abison New Energy targets the global market, and its product sales and service network can cover countries and regions such as China, Europe, America, and Asia Pacific. In 2023, the company's new energy product portfolio was developed, certified, released and listed in an orderly manner, and domestic and foreign marketing promotion and channel layout work was carried out in an orderly manner; the smart factory production line was laid out according to the plan, and some projects were successfully commercially delivered; and the energy storage equipment business achieved revenue of 0.4 billion yuan.

Investment advice: Taking into account the pace of downstream market recovery, we adjusted our original expectations. Operating revenue from 2024 to 2026 is estimated to be 58.39 (previous value: 51.15) /80.39 (previous value: 64.80) /100.23 billion yuan (increase), with growth rates of 45.8%/37.7%/24.7%, respectively; net profit to mother of 4.48 (previous value: 4.31) /6.11 (previous value: 5.68) /7.98 (new) billion yuan (new), with growth rates of 41.8%/36.4%/30.7%, corresponding PE 11.1/8.2/6.2, respectively. Considering that Abbison is one of the companies with the most comprehensive coverage of LED display product segments in the world and can provide global customers with a wide range of product choices, the superimposed company brand has a high popularity and reputation in the global LED display field, and has a high position in many market segments. With the improvement of the new energy business layout and production capacity investment, it is expected that the company's revenue/performance growth points will be added. Maintain a “buy-A” rating.

Risk warning: downstream demand falls short of expectations; progress of new technology/product/project falls short of expectations; risks caused by exchange rate fluctuations; risks caused by the development of LED display technology.