Specializing in video and display control technology for more than ten years, it has grown into a leader in the LED display control system industry. Since its establishment in 2008, the company has focused on the core algorithms of video and display control technology, and currently provides comprehensive solutions for more than 4000 companies around the world. Since the establishment of 4 overseas offices in 2014, the company has focused on starting a global layout. Up to now, the company has service outlets in 37 regions around the world, including 8 overseas outlets. During the period 2020-2023, the company's overseas revenue had a compound annual growth rate of 65.80%, and the overseas market expanded rapidly. In the first quarter of 2024, the company continued its high boom in 2023, generating revenue of 0.681 billion yuan, a year-on-year increase of 22.66%, and achieved net profit to mother of 0.123 billion yuan, an increase of 44.54% over the previous year.

Display control system: The LED industry is booming, and the value of display control systems is being restructured. 1) The upgrade of mini/micro display technology is compounded by the decline in the cost of mini LED. In the future, the cost advantage of traditional LCD will weaken, downstream screen manufacturers will accelerate the Mini LED layout. The company continues to cooperate with leading screen manufacturers. Customers are highly sticky, and they have pure small-pitch solutions. 2) The trend of high-definition video promotes the increase in pixel density, promotes the upgrading of display control product technology, and reconstructs the value of display control systems. Diverse application scenarios such as XR (extended reality), virtual shooting, and naked eye 3D are expanding to accelerate technology penetration. 3) Industry pattern: The company's leading position in LED display control systems is stable. We estimate that the market share has exceeded 60%, and the industry CR2 exceeds 70%, which is expected to benefit from the LED industry's procyclical growth.

Video processing equipment: collaborative display control system, two in one to quickly meet demand. The general trend of integrating display control systems and video processing systems is improving the overall effect through integration, superimposing the development of the ultra-high-definition information industry, and accelerating the upgrading of video processing equipment; the company's video processing system business volume is increasing year by year, and the video processing equipment+transmission card 2-in-1 product is expanding smoothly, driving the volume and price of products to rise sharply. At the same time, compared to overseas manufacturers, the current share of domestic video processing equipment manufacturers is small, and it is expected that they will use their cost performance advantages to enter the high-end overseas market. The revenue scale of the business is expected to reach 1.9 billion yuan, 2.9 billion yuan, and 4.1 billion yuan respectively between 2024 and 2026, with annual growth rates of 54%, 48%, and 42%, respectively, showing strong growth and market potential.

Cloud service: 10,000 screen interconnection, dual “cloud” platforms are ready to go. According to IoT Analytics, the number of global IoT device connections will surge from about 14.4 billion in 2022 to about 29.7 billion in 2027, with a compound annual growth rate of 16%. Screen Boss and Screen Genie are the company's two major cloud service platforms. According to data released on the official WeChat account on June 28, 2023, users post 0.061 million more programs per week, 0.011 million more plan configurations, 0.0083 million construction and commissioning, and 0.0142 million online operation and maintenance. The dual-cloud platform has become a popular cloud service platform in the industry.

Investment advice: We expect the company to achieve revenue of 4.213/5.726/7.649 billion yuan in 2024-2026, up 37.9%/35.9%/33.6% year on year; achieve net profit to mother 0.809/1.146/1.617 billion yuan, up 33.2%/41.7%/41.1% year on year. Carlet, Chunzhong Technology, Guangfeng Technology, and Shiyuan Co., Ltd. were selected as comparable companies. The average PE of comparable companies in 2024 was about 29.2x. Considering that the company is currently in an accelerated growth stage, combined with competitive advantages such as its industry position and forward-looking investment in MLED, the company was given 30xPE in 2024. The estimated net profit to the mother in 2024 is about 0.809 billion yuan, and the target market value is about 24.21 billion yuan. The corresponding target price is 262.5 yuan. For the first time, coverage was given a “strong” rating.

Risk warning: The development of the MLED industry falls short of expectations, video equipment falling short of expectations, the risk of macroeconomic fluctuations, and the risk of lifting the ban on restricted stocks.