Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 1.563 billion yuan, a year-on-year increase of 17.56%; realized net profit to mother of 0.324 billion yuan, an increase of 37.69% over the previous year; and realized deducted non-net profit of 0.313 billion yuan, an increase of 36.69% over the previous year. In 2024, Q2 achieved revenue of 0.882 billion yuan, up 13.89% year on year and 29.46% month on month; realized net profit of 0.202 billion yuan, up 33.84% year on year, up 64.71% month on month; realized deducted non-net profit of 0.197 billion yuan, up 34.85% year on year and 68.79% month on month.

The forward-looking layout of MLED-related products led to rapid growth in 24H1's performance: In the first half of 2024, since the company had already deployed relevant technology in the MLED field ahead of schedule and launched products such as core testing equipment and integrated circuits, the company's MLED related revenue grew rapidly as the MLED industry grew rapidly. Furthermore, the company actively explores high-value-added fields in downstream application scenarios to contribute higher gross profit to the company. The company's consolidated gross margin for the first half of 2024 was 55.54%, +6.14pcts year on year; net margin was 20.76%, +3.04pcts year on year. In terms of expenses, H1's sales, management, R&D and financial expenses rates in 2024 were 13.64%/5.13%/15.70%/-0.45%, respectively, with year-on-year changes of +1.19/+0.31/+2.07/-0.40pcts, respectively. Among them, R&D expenses were +35.40% compared to the same period, mainly due to the increase in the company's R&D projects and R&D personnel, and the increase in R&D personnel remuneration and R&D service fees.

Price increases are compounded by high capacity utilization rates, and the gross margin of core products has increased markedly: the company's products or services are mainly divided into three categories: LED display control systems, video processing systems, and cloud-based information publishing and management systems. In the first half of 2024, the company's LED display control system achieved a sharp rise in volume and price, and the capacity utilization rate reached 124.35%, increasing the gross margin of the product by 7.72 pcts to 46.46% year on year; the average unit sales price of video processing systems was +15.21%, the capacity utilization rate was 104.00%, and the product gross margin was +6.69 pcts year on year. We believe that as the application scenarios of LED displays are further broadened and ultra-high-definition technology continues to be upgraded, the sales volume and unit price of the company's core products are expected to increase further, while the capacity utilization rate is expected to remain high, and the company's performance is expected to continue to grow.

Leveraging technical advantages to launch innovative display control solutions, competition demand drives overseas market growth: In the first half of 2024, the company actively participated in large-scale exhibition events such as 2024 International Smart Display and System Integration Exhibition (ISLE), 2024 China (Beijing) International Audiovisual Integrated Equipment and Technology Exhibition (InfoComm China 2024), InfoComm US Exhibition, etc., and showcased XR virtual shooting solutions, MLED ultra-high image quality full-link solutions, high-end stage rental solutions, new professional display control distributed solutions, etc. A variety of innovative solutions. In addition, products such as the company's COEX control system, A series receiver card, and H series video processor were used in the opening and closing ceremony of the 2024 Paris Olympics, various main sports stadiums, and spectator and celebration displays. In 2024 H1, the company achieved revenue of 1.274 billion yuan in the domestic market, +13.17% year on year; in overseas markets, revenue of 0.289 billion yuan, +41.78% year over year. The company grasped the opportunity of terminal demand in the market, increased its overseas business expansion efforts, and overseas market revenue increased significantly.

First coverage, giving a “gain” rating: The company is a high-tech company with algorithms as the core, software and hardware as carriers, and provides customers with full-link solutions from display control to video processing around LED display applications. With its technical advantages, the company's products have been used in many large-scale key events such as the CCTV Spring Festival Gala, the Beijing Winter Olympics, the Hangzhou Asian Games, and the World Cup. The product effect has been verified by many parties and has won a good reputation in the market. The company now serves more than 4,000 customers worldwide. The main customers include LED display industry leaders such as Riyadh, Zhouming Technology, and Abison, security industry leaders such as Hikvision and Dahua Co., Ltd., and commercial display industry leaders such as BOE and Zhaochi Co., Ltd. Benefiting from advances in LED chip cutting and packaging technology, reduction in raw material costs, and miniaturization of point spacing, LED displays are also developing towards high density, high resolution, and high reliability, and the market size continues to expand. According to TrendForce Research Institute data, in 2026, the global LED display market will reach 12.955 billion US dollars; of these, the global miniLED display market will reach 10.921 billion US dollars; the global microLED display market will reach 1.354 billion US dollars. With the technological development and cost of MLED displays falling, the size of the LED display market is expected to continue to expand, and the company's performance is expected to continue to grow. The company's net profit for 2024-2026 is estimated to be 0.828 billion yuan, 1.119 billion yuan, and 1.491 billion yuan respectively, EPS is 8.95 yuan, 12.10 yuan, 16.13 yuan, and PE is 17X, 13X, and 10X respectively.

Risk warning: MLED industry sentiment falls short of expectations, risk of changes in product unit prices, risk of technological innovation, risk of market competition.