The company was founded in 2005 and has been deeply involved in the OLED industry for nearly 20 years, and has successively entered the materials and evaporation source equipment business. Currently, the company's materials and equipment business is two-wheel drive. Organic light-emitting materials account for 61% of revenue in the 2023 revenue structure, and has shown an upward trend in recent years. The equipment business is closely linked to the capital expenditure of the OLED panel industry. It reached a high revenue point in 2021, with negative cyclical growth in the past two years.
OLED panel industry development stage:
1) Demand side: In the small-size sector, the penetration rate of OLED in smartphones continues to increase. The penetration rate is expected to be 50.8% in 2023, and the penetration rate of OLED in mobile phones will exceed 60% by 2026. In the medium to large size sector, laptops, tablets, vehicles, etc. have become the next growth point in the AMOLED market.
2) Supply side: The trend of internal migration of OLED production capacity has not changed, and domestic panel manufacturers already have strong competitiveness in the small-size field. According to TrendForce data, in 2023, China's OLED panel production capacity will account for 43.7% of the world, while South Korea will account for 54.9% of the global OLED panel production capacity. Large- and medium-sized applications are driving the construction of supply-side high-generation production lines. Both China and South Korea have already begun construction, and BOE and Vicino in China have both announced plans to invest in the 8.6-generation line.
Company business: The materials business continues to promote domestic substitution. The equipment business may benefit from higher generation line investment 1) Materials business: The company mainly focuses on organic light-emitting materials, which are the core of OLED displays. In recent years, domestic panel manufacturers have gradually become competitive, and under the influence of factors such as cost and supply chain safety, they have begun to promote domestic substitution on the material side. The market size of OLED organic materials in the Chinese market in 2023 is about 4.3 billion yuan, but the localization rate is about 38%, and the localization rate for light-emitting layer materials is less than 6%. As the early core patents of international giants expire, domestic material manufacturers ushered in a good opportunity for development. The company has been deeply involved in the materials industry for many years and has provided organic light-emitting materials to well-known OLED panel manufacturers such as Vicino Group, Hehui Optoelectronics, TCL Huaxing Group, BOE, Tianma Group, and Xinli Group. In addition, the company is actively developing new categories. Thin film packaging materials have been stably supplied on production lines, and PSPI materials have partially passed customer verification.
2) Equipment business: One of the core equipment of the OLED production line is an evaporator. The evaporation source produced by the company is one of the core components of the evaporator, and has successfully broken foreign monopolies, and is the leading domestic evaporation source. Equipment is closely related to the capital expenditure of downstream manufacturers. Currently, investment in the 6th generation line has basically entered the final stage, and there is still a need to upgrade production lines in existing production lines. In terms of high-generation production lines, BOE 8.6-generation lines have begun bidding for core equipment. The company has now completed the development of high-generation evaporation sources and is undergoing performance and parameter tests, which are expected to benefit deeply in the future.
Profit forecast and investment suggestions: The company is expected to achieve revenue of 0.703, 0.974, and 1.281 billion yuan in 24-26, with year-on-year growth rates of 35.81%, 38.58%, and 31.59%. The estimated net profit to mother is 0.172, 0.268, and 0.384 billion yuan, with year-on-year growth rates of 40.70%, 55.66% and 43.57%, corresponding to the 25-year PE of 16X. The average PE of the three comparable companies in 2025 is 22X. The company's materials business is rapidly expanding, equipment The business is expected to benefit deeply from the implementation of the 8.6-generation line investment, giving it a “recommended” rating.
Risk warning: the risk of technology upgrades and iterations and technology research and development not being able to effectively meet market demand; the risk of customers in the evaporation source business, the risk of high order concentration and unsustainable future business acquisition; the risk of some core raw materials for evaporation source products being imported; the risk of fluctuations in the downstream OLED industry and increased market competition.