Key points of investment

Core view: Video image display control and processing is a racetrack with long slopes and heavy snow. The expansion of display application scenarios and the trend of ultra-high definition and complexity of video images have led to continuous growth in industry demand. The trend of high-definition images will also drive the continuous evolution of technology iterations in the industry, so competitive vendors in the industry can not only achieve rapid revenue growth, but also maintain good profitability. On this track, with consistent technical investment and forward-looking industrial layout, the company continues to extend the length of industrial chain coverage and continue to deepen its own business moat. Comprehensive industrial layout, leading and reliable products, perfect sales and service system, and deep customer relationships enable the company to achieve continuous and rapid growth. On this basis, thanks to the increase in the shipping area of direct display screens and the rapid increase in screen pixel density, the company's hardware sales such as display control systems have achieved correlated linear growth, and businesses such as back-end video processing equipment have room for multiple linear growth.

Video image display control industry welcomes golden growth period

The growth of LED display control systems has mainly benefited from the increase in the total number of pixels in the industry, and the sharp drop in the price of miniLED direct display beads/modules has led to large-scale growth in direct display applications. The commercialization needs of emerging economies in overseas markets, consumer demand for continuous visual advancement and upgrading, and emerging application scenarios (such as XR shooting, LED all-in-one computers, C-end high-end TVs, naked eye 3D, etc.) have all boosted the advanced growth of the LED display industry. The continuous increase in the shipping area of LED displays and the increase in screen pixel density will drive the overall rapid growth of the industry.

In addition to benefiting from pixel growth, the growth of video processing equipment will also fully benefit from the trend of high-end demand in the display industry, and its growth rate is more obvious than hardware (receiver cards, etc.). In ultra-high-definition and complex display scenarios, it is often difficult to drive a screen with the computing power of a computer or single board card. More professional video processing equipment is needed to ensure the display effect. After the screen is made larger, the requirements for algorithms such as image synchronization, segmentation, fusion, and coordination will greatly increase the computational and processing capacity requirements of video processing equipment. Furthermore, as a powerful tool for miniLED direct display screen cost reduction, virtual pixels are expected to become a hit in the consumer market and commercial display market. Sub-pixel multiplexing and rendering algorithms are the core of virtual pixels, and control system manufacturers also play a key role in this.

High-intensity R&D consolidates competitive advantage, and the growth space is clear for the video image display control industry. For the video image display control industry, technical strength is the key to competition. In terms of R&D, the company has always maintained high R&D investment, and regards R&D and technical capabilities as an important reflection of the company's core competitiveness. The performance of the company's LED display control systems, video processing equipment and other products is at the leading level in the industry, and the company continuously maintains and strengthens its leading edge through continuous product innovation and iteration. In terms of business layout, the company has covered the last five of the seven strategic control points of the LED display chain (LED light-emitting chip manufacturing, massive transfer, panel packaging and testing, core integrated circuits, display control, video playback processing and transmission, cloud information release and display management). These business lines cooperate with each other and are structured as a very effective competitive moat for the company as a whole, and each field also has clear room for growth:

Display control system business: The company occupies a dominant position in this field and has an outstanding position in the industry. The company's products occupy a major share among core customers such as Riyadh, Zhou Ming, and Abbison, so the company will fully benefit from the growth of the industry brought about by the expansion of miniLED direct display applications;

Video processing equipment business: Under the ultra-high-definition and complex development trend of the downstream display industry, demand for video processing equipment is growing better. With the rapid increase in the company's product competitiveness and the smooth advancement of the global layout of sales and service networks, the company's market share of video processing equipment, especially in overseas markets, is expected to continue to increase;

Cloud-based information publishing and management system business: The company's two clouds, Screen Boss and Screen Genie, can save a lot of labor costs and greatly improve efficiency for downstream customers. With the huge value created by the two clouds, the cloud service business is developing rapidly. The number of users and the number of connected displays continues to rise, and the continuous expansion of scale also gives the business more room for imagination in the future. As the scale effect of cloud services gradually becomes apparent, the profit margin of this business is expected to increase significantly.

MLED intelligent equipment and core chip: Through long-term technical research, the company pioneered MLED core chips and intelligent equipment to solve the technical problems of MLED displays. Among them, intelligent equipment can help downstream panel manufacturers solve production pain points in massive transfers, product inspection, correction, and standardized manufacturing, improve and enhance their production efficiency, reduce product costs, and improve product quality. With the advantages of small area, low power consumption and low cost, ASIC control chips can better meet the needs of consumer-grade scenarios. With the introduction of intelligent equipment and core chips, the company has a strong first-mover advantage and a strategic card position advantage in MLED competition. With MiniLED's direct application in consumer-grade scenarios, this block of business is expected to start up quickly.

Profit forecasting and valuation

Revenue for 2024-2026 is estimated to be 3.958 billion yuan, 5.145 billion yuan, and 6.589 billion yuan, respectively, up 29.6%, 30.0%, and 28.1% year-on-year. The corresponding net profit to mother is 0.865 billion yuan, 1.207 billion yuan, and 1,598 billion yuan, respectively. The PE corresponding to the current market value is 16.3, 11.7, and 8.8 times, respectively, covered for the first time, giving a purchase rating.

Risk warning

Downstream direct display demand falls short of expectations; market competition risk; technology iteration risk; new product market development risk.