The world leader in display control boards and interactive smart tablets, with abundant cash and high quality management. The company's products such as LCD main control boards and interactive smart tablets have been widely used in the field of home appliances, education informatization, and enterprise services. Its subsidiaries include Shivo and MAXHUB, which are in a leading position in the world. The “zero receivables” principle ensures that the company has good cash flow and rewards investors through cash dividends. By the end of '23, the company's current assets were 4.718, 0.296, and 4.655 billion yuan in current assets, accounting for 35.5%, 2.2%, and 35% of current assets, respectively. From 19-23, the company's dividend rate remained above 30% all year round and showed an upward trend. In '23, the company's total dividend for the year reached 0.592 billion yuan, with a dividend rate of 43.2%.

The board card business is expected to resume, and intelligent controllers provide new growth points. From a global perspective, 2024 is a big year for sporting events and the global economy is expected to boost TV sales; from a domestic perspective, the trade-in policy is expected to stimulate the recovery of domestic TV sales. As a global leader in the board card sector, the company is expected to continue to benefit from the resumption of growth in TV shipments. Furthermore, the company continues to increase investment in the household appliances business to provide domestic and foreign home appliance customers with products and services such as high-reliability and cost-effective controllers, and has maintained a high growth rate or provided new growth points in recent years.

Overseas performance has grown rapidly, and channels have been broadened to continue to strengthen our own brands. Currently, the penetration rate of overseas interactive smart tablets is low, the market is in its infancy, and there is plenty of room for improvement. According to Qunzhi Consulting, the IFPD penetration rate in education in China reached 65% in 2022, while the overseas penetration rate was less than 10% during the same period. The low penetration rate overseas is compounded by the acceleration of education informatization and enterprise digitalization, and IFPD has broad room for growth. The company IFPD is in a leading position in the world. It actively grasps overseas market dividends, accelerates overseas channel construction, and increases the penetration rate of overseas brands while achieving rapid growth in overseas markets. In the education market, the company mainly focuses on ODM, and also relies on ODM capabilities to promote its own education brand. The company actively helps the digital transformation of education in various countries through technological and product innovation, focuses on emerging markets such as the Middle East and Southeast Asia, and actively promotes China's solutions for digitization of education and artificial intelligence education.

In the conference market, the company accelerates the business development of its own brand MAXHUB through global ecosystem expansion. MAXHUB and Microsoft jointly released MTR solutions and launched chip cooperation and strategic cooperation with Intel. We believe that the company is vigorously promoting the development of overseas brands. On the one hand, through localization, it can better understand the individual needs of overseas customers and occupy consumers' minds, thereby increasing brand influence and market share; on the other hand, overseas brands can independently grasp the product production and supply process, and exert scale effects, which is expected to increase the gross profit margin of products in the future.

Domestic education tablets ushered in policy dividends, and the AI big model helped Shivo grow. Relevant policies such as “equipment renewal” in 2024 will clearly provide financial support to the education sector. The business model of education information technology enterprises mainly uses the B2G/B2B model, and the country's financial education funding related to “equipment renewal” is highly deterministic and is expected to be active in related procurement activities. Furthermore, China is actively promoting the digitalization of education, and AI models may empower education or become a trend. Shivo has focused on education for 15 years. With its advantages in algorithms, data, and application scenarios, Shivo released the Shivo teaching model in 2023 and combined it with software and hardware for teachers and students, which is expected to continue to consolidate its competitiveness in the digitization process of education. Currently, the share of demand for educational hardware in China, such as learning machines, is increasing in the high-end price band with the power of large models, and educational software is also paying for the value of large models. We believe that in this context, the Shivo Education Model is expected not only to drive up the unit price of products through hardware, but also to increase user ARPU through software subscription systems. The combination of software and hardware in Sivo products will eventually increase the gross margin of the company's education business and enhance the company's profitability.

Investment advice. We expect the company to achieve revenue of 22.81, 25.519, and 28.437 billion yuan in 2024-2026, up 13.1%, 11.9%, and 11.4% year on year; net profit to mother of 1.403, 1.679, and 1.976 billion yuan, up 2.4%, 19.7% year on year. Considering the company's leading position in the global board card and IFPD sector, it will continue to benefit from the recovery in downstream demand and overseas growth opportunities, cover it for the first time, and give it a “buy” rating.

Risk warning: raw material prices are rising, overseas market development falls short of expectations, product iteration falls short of expectations, and policy implementation falls short of expectations.