The company is a domestic smart micro investment leader, and its share of overseas business is rapidly increasing. According to IDC, since the company broke the foreign brand monopoly in 2018, the company ranked first in shipments for six consecutive years in 2018-2023, and had outstanding advantages in DLP technology and intelligent algorithms. According to IDC, along with technological innovation and penetration into household scenarios, the CAGR of overall domestic projection/household projection shipments in 2015-2019 was 21%/81%, respectively. Under the influence of macro and external environments, the CAGR of domestic/total domestic projection shipments fell to 0.6%/10% in 2019-2023. The company actively launched new products and adjusted prices to maintain its position in the domestic market while continuing to promote a global layout. The share of overseas business increased from 2% in 2019 to 26% in 2023.

Laser products in the industry are rapidly released, and the company's self-developed light source technology strengthens its position in the middle and high-end market.

In 2023, with supply-side optimization, the laser production line gradually matured, and the price of entry-level 1LCD 4K laser products fell to the 3000-4000 yuan price range. According to Rotu Technology, sales of UHD products increased 194% year on year in 2023, and the market share reached 5.2%, up 3.6 pcts year on year. The company launched two high-end new products, RS 10 Pro and RS 10, in early 2024, equipped with a new self-developed Dual Light 2.0 eye protection tricolor laser technology, which has outstanding advantages in solving the problems of color edge ghosting and speckling.

The Play series has broken through the cost performance channel and is expected to drive the company's domestic sales growth rate back up. Competition between LCD and DLP technology is still relatively fierce on low-end racetracks. In 2022, domestic manufacturers broke through closed opto-machine technology, and the unit price was low and superposition performance was improved, driving the rapid release of LCD products. As of 2024Q1, the LCD/DLP market share was 69.4%/30.5%, respectively. The company has a strong position in the middle and high-end market. The launch of the Play series broke through the price range of 1500-2000 yuan to resist competition for LCD products. In April 2024, the company released a new Play5 product, which won 618 first place in online single product sales, leading to a year-on-year increase in sales of the Play series.

Investment advice: The company has outstanding R&D capabilities, innovative technology leads the market, new products and overseas drive the company's growth. We expect the company to achieve net profit of 0.201, 0.297, and 0.39 billion yuan in 2024-2026, corresponding PE of 23.26, 15.78, and 12.00 times, respectively. This is the first coverage, giving it an “increase in wealth” rating.

Risk warning: Domestic sales growth falling short of expectations, fluctuations in raw materials and shipping prices, channel expansion falling short of expectations, risk of lifting the ban on restricted shares, risk of RMB exchange rate fluctuations, and risk of shareholder holdings reduction.