Key points of investment

One-sentence logic

The company was able to achieve significant independent growth over the industry during the downturn, showing that the company did not rely solely on changes in industry prosperity, but also had its own independent growth drivers: First, on the COB segment circuit, the company has strong technical and market advantages, and this is one of the few growth areas in the direct display market this year; secondly, the Nova industry chain covers a long period of time, and there is room for incremental growth in segments such as large video consoles, MLED equipment, and ASIC, and there is room for growth in many domestic competition in these fields. Therefore, with the rapid increase in MiniLED COB penetration rate and the increase in the market share of the company's high-value-added products, it can be guaranteed that the company will continue to grow beyond the industry in the next few years.

Where did the company's expectations fall short?

The market believes that the company will enter a period of decline in growth, mainly for two reasons: 1) using the decline in profits of downstream Riyadh, Zhou Ming, and Abbison as the basis for measuring the mini LED segment, and then drawing the conclusion that the upstream and downstream “metropolis” of the industry will not grow; 2) the decline in individual profits of Q1 or other rivals in the industry in the first half of the year, as a pervasive change in the industry, and further believes that the company's growth will be difficult to continue.

We judge that the company's compound profit growth rate for the next three years can be maintained at more than 30%. The increase in MiniLEDCoB's penetration rate, the continuous growth of overseas markets, and the company's active expansion in high-value segments will drive the company's profit margin to continue to increase, and also make the company's net profit growth more elastic than the revenue side. The driving mechanism for the growth of the company's performance exceeding expectations is as follows:

1) Increase in MiniLED COB penetration rate: As costs continue to decrease, miniled is expanding its application scenarios by a large percentage. Currently, the penetration rate of commercial displays has increased dramatically, and applications in consumer scenarios such as home theaters and all-in-one conference machines are gradually gradually being applied. The company accurately grasped industry trends and carried out technical layout in advance. Through long-term technical research, the company pioneered MLED core chips and intelligent equipment to solve the technical problems of MLED displays. This also further expanded the length of the company's industrial chain coverage. With the depth and length of the industrial chain coverage, the company's display control market share in the MLED field, especially the COB segment circuit, is higher than in the traditional field, so the company can fully enjoy the main increase brought about by the increase in MLED penetration rate, and related products in the MLED field also have better gross profit margins Level, the rapid growth of the company's MLED-related revenue will drive an increase in the gross margin of the display control business line, thereby hedging the weak development trend of the traditional LED display control market.

2) The growth and share of the company's overseas export revenue: The growth rate of the LED display market is related to the economic prosperity of various countries. Judging from the growth rate of overseas markets, the European and American markets are growing steadily, while commercial demand is strong in emerging economies such as Asia, Africa, and Latin America. Overall, the overseas market has maintained a high level of prosperity, and overseas customers also pay more attention to the quality and performance of products, and are less sensitive to price. Therefore, compared with domestic, overseas export products, the overall profit margin is better. The company has been entering the international market since 2013. The company has now formed distribution agency channels covering major countries and regions around the world, and the company occupies a major share of leading global customers such as Riad, Zhouming Technology, Abysson, Lianjian Optoelectronics, Hikvision, and Dahua Co., Ltd., so the company is the main beneficiary of overseas market growth.

3) The company actively expands high-value fields in downstream application scenarios, such as virtual shooting and high-end leasing, and maintains high-intensity R&D investment, and continues to launch new products with higher added value, contributing higher gross profit to the company: For the video image display control industry, technical strength is the key to competition, and the company has always maintained a high level of R&D investment. In the past, the video processing equipment market was occupied by established European and American manufacturers such as Barco, KTV, Black Magic, and Extron. These European and American manufacturers have many years of experience in signal data processing, and their product layout is early and extensive. Domestic manufacturers started later than foreign manufacturers, and only in the late 90s did domestic products that mainly achieve basic functions appeared one after another. After entering this field, the company continued to invest in research and development, and the gap between the overall technology level and European and American companies continued to narrow, and even surpassed in some products. For example, the H20 Super Compound launched by the company in 2020 is more competitive than the products of established European and American manufacturers in terms of carrying capacity, number of supported input and output cards, and in terms of product ease of use and friendliness. However, it is difficult for established European and American manufacturers to obtain Moore's Law dividends due to slow product iteration. Today, the company continues to make efforts in high-end and complex application scenarios to enhance the competitiveness of products and solutions.

Inspection and catalysis

Inspection indicators: MiniLED COB's shipping area growth rate and penetration rate; overseas LED directly shows the market scale growth rate; and the revenue performance of the company's new products.

Catalyst: MiniLED COB market penetration continues to increase, and the company's quarterly performance continues to surpass industry performance data; it clearly shows that the industry is a barometer of the commercial economy, and if the domestic macroeconomy improves, it will drive the industry to grow beyond expectations.

Research value

Unique understanding: There is a different perception of the company's growth - the market believes that domestic LED directly shows the “internal volume” of competition in the industry. As a major upstream supplier, the company will also enter a slump in growth. We believe that the company will hedge against the decline in revenue growth at the industry level by selectively doing projects that cannot be “rolled” by competitors.

A different understanding from the previous one: I have a deeper understanding of the competitive moat formed by the company in the MLED field - the LED display industry chain includes seven strategic control points: LED light-emitting chip manufacturing, massive transfer, panel packaging and testing, core integrated circuits, display control, video playback processing and transmission, and cloud information release and display management. The first two links have strong manufacturing attributes and are not areas the company excels at. In the next five links, the company has achieved business coverage. The launch of intelligent equipment and core IC products means the length of the company's industrial chain covers Further expansion. Especially in the MLED field, intelligent equipment can greatly help panel manufacturers solve production pain points in massive transfers, product inspection, correction, and standardized manufacturing, and is a key production equipment for downstream manufacturers. Through a comprehensive layout, the company pioneered the launch of intelligent equipment in the industry and applied it in large quantities among downstream customers. After the equipment development period, downstream manufacturers are less willing to replace the equipment again, considering the stability of production yield, and intelligent equipment is a front-end link in the LED display industry chain. After downstream customers use these products, considering the synergy between products, it is also more likely that downstream customers will continue to use the company's display control, video processing equipment and other products. Therefore, with significant technical advantages in intelligent equipment products, the company has a strong first-mover advantage and strategic card position advantage in MLED competition, and widens the gap with competitors. This is also an important reason why the company occupies a dominant market share in the MLED field and enjoys a high gross margin. The depth and length of the industrial chain layout is also where the company's moat lies.

Profit forecasting and valuation

Operating revenue for 2024-2026 is expected 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, up 42.5%, 39.6%, and 32.3% year over year. The PE corresponding to the current market value is 16.5, 11.8, and 8.9 times, respectively, based on the company in '25 The net profit data of 1.207 billion yuan gave the company a 20 times PE valuation. The corresponding market value was 24.1 billion yuan, the corresponding stock price was 261.2 yuan, and the current price space was 69%, maintaining the purchase rating.

Risk warning

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