Key points of investment:

The analytical framework for this paper: the growth of Nova Nebula = LED screen factory output value* display control cost ratio* market share. The first two are industry beta, which essentially redistributes the value of LED display output value in the display control process; the third item is α, which is essentially a reflection of the overall competitiveness of display control manufacturers.

Industry growth: LED display output value is redistributed in the display control process. 1) Industry-driven dismantling: cost reduction, expansion of production, expansion of output value of LED screen manufacturers; high-definition video display, centralization of video processing equipment, diversification of video solutions, increase in the proportion of display control costs. We are in “LED Display Control: Triaxial Growth, Recommended Domestic Oligopoly!” The long-term growth potential of the industry has been discussed. 2) Focus on the short term. On the one hand, there is an oversupply of LEDs in the middle and upstream and active expansion of production. The trend of “continuous production expansion - pixel price reduction - acceleration of penetration” continues. The growth rate of pixel points is higher than the revenue growth rate of screen manufacturers, and the high boom is expected to continue. On the other hand, according to estimates from major global competitors, the global static market space for video processing equipment is estimated to exceed 10 billion yuan.

Company growth: A reflection of the comprehensive competitiveness of display control manufacturers. With a highly scarce corporate management culture as its core, Nova Nebula continues to grow through product matrix expansion, and lays out MLED's innovative business ahead of time. It is expected to enjoy dividends in the MLED popularity trend.

1) Leading the entire video display control link, and the management culture is unique. Deeply involved in the field of video display control, implemented a global layout “based in Xi'an, surrounding Beijing and Shenzhen, radiating the world”, with a “7×24 hour” all-weather service, with more than 4,000 customers. The industrial chain location is exquisite, and the new model in Shaanxi Province shows the “chain owner”. Adhering to the “striver-oriented” values, distribution to strivers is the core of the company's ultimate service capability, mutual assistance team style, and strong R&D strength.

2) Product matrix expansion, leading the MLED era. The display control business is highly sticky, highly tied to downstream screen manufacturers, and card positions expand the audio and video market. The company's second-curve video processing system has outstanding cost performance and advanced integrated design concepts, and has become a mainstay. Under the trend of high-definition and miniaturization of MLEDs, the hardware level is facing bottlenecks. Empowering or providing breakthroughs in leading display control algorithms, the company has 15 years of algorithm accumulation, and has more than 800 patents in key technical dimensions such as LED light emitting mechanism and characteristics. It lays out smart devices and MLED chip businesses ahead of time to help standardize MLED mass production and standardized applications, and create a new beta in the industry, which is expected to lead the MLED era.

Investment analysis opinion: First coverage, giving an “increase in wealth” rating. We expect the company to achieve revenue of 42.05/57.12/7.669 billion yuan in 24-26 years, +38%/+36%/+34% year-on-year, and net profit of 8.08/11.92/1.78 billion yuan, +33%/+48%/+49% year-on-year. According to the prospectus, Carlet, Chunzhong Technology, Guangfeng Technology, and Shiyuan Co., Ltd. were selected as comparable companies. In 2024, a comparable company's average PE was about 34x. Considering Nova Nebula's growth stage, combined with competitive advantages such as leading position, high binding to screen manufacturers, and forward-looking investment in MLED, the company was given a PE=34x in 2024. The estimated net profit to the mother in 2024 is about 808 million yuan, and the target market value is about 275 billion yuan. Due to conservative considerations such as downstream inventory volatility and product iteration uncertainty, etc., it was covered for the first time and a “gain” rating was given.

Risks: Technological upgrades and iterations fall short of expectations; macroeconomic recovery falls short of expectations; market competition patterns fall short of expectations, etc.