Investment logic:

OLED is leading the way in organic light-emitting materials and equipment, and its performance is growing rapidly. The company has been deeply involved in the OLED light-emitting materials industry for many years and is a leading manufacturer of OLED organic materials in the industry. The company's 6-generation OLED evaporation source has broken foreign monopolies, and product technical indicators have reached the international advanced level. 24H1's revenue was 0.342 billion yuan, up 4.39% from the same period, and net profit to mother was 0.092 billion yuan, a decrease of 5.81%.

The boom in the OLED industry is expected to improve, and the organic light-emitting materials business has broad prospects. According to TrendForce, in 2023, China accounts for 43.7% of the world's OLED panel production capacity, and South Korea accounts for 54.9% of the world. China's global market share of OLED panel production capacity is rapidly catching up with the number one OLED panel in the world. Panel manufacturers such as BOE and Vicino have already laid out high-generation OLED production lines. The company is one of the few domestic manufacturers that can independently produce organic light-emitting material terminal materials. It has strong technical strength and has established stable cooperative relationships with well-known domestic OLED panel manufacturers. In 2023, the company's organic light-emitting materials achieved revenue of 0.318 billion yuan, an increase of 49.42% over the previous year. At the same time, the company strategically lays out products such as “stuck neck” product packaging materials and PSPI materials in the upstream core materials field. It has now achieved production line supply, and is expected to become a performance growth point for the company's materials business in the future.

The evaporation source equipment business is progressing steadily and is expected to benefit from the construction of high-generation AMOLED production lines. The company's sixth-generation AMOLED linear evaporation source has been supplied to major domestic panel manufacturers. In 2023, its subsidiary Shanghai Shengyi successfully completed the contract signing of additional evaporation source projects in Xiamen Tianma Phase II and Chongqing BOE Phase III. As the panel manufacturer's sixth-generation laminated transformation project progresses, the company's sixth-generation evaporation source orders will continue to be introduced. In addition, BOE invested 63 billion yuan to build the first 8.6th generation AMOLED production line in China, and Vicino is advancing the high-generation production line project. The company has prepared technical development reserves for G8.5 (G8.6) high-generation evaporation sources. It has completed the development of high-generation evaporation sources, and is undergoing performance and parameter tests, which are expected to benefit from the construction of high-generation production lines. At the same time, the company is steadily advancing research and development of high value-added products such as evaporators for silicon-based OLEDs and perovskite evaporation machines.

Profit forecasts, valuations, and ratings

We predict that in 2024-2026, the company will achieve net profit of 0.173, 0.261, and 0.336 billion yuan, respectively, with a year-on-year increase of 41.51%, 50.60%, and 28.81%. Considering the company's high growth, we valued the company 30 times in 2024, with a target price of 24.94 yuan/share, covering the first time and giving it a “buy” rating.

Risk warning

The development of new materials fell short of expectations; the production progress of OLED panel manufacturers fell short of expectations; the company's introduction from downstream customers fell short of expectations.