Global LED video display control leader, high customer resources, impressive overseas business growth

The company was founded in 2008 and is the world's most competitive LED display solution service provider. According to Trend Force data, the company's global market share in the LED control field will reach more than 60% in 2023.

In 2023, the company achieved revenue of 3.054 billion yuan, a CAGR of 25.97% in 2019-2023, realized net profit of 0.607 billion yuan, and a CAGR of 26.37% in 2019-2023. The company's main business covers the three major categories of LED display control systems, video processing systems, and cloud-based information publishing and management systems. Revenue in 2023 was 1.442/1.275/0.159 billion yuan, respectively, +30.19%/+58.76%/+16.65% compared with the same period last year. The company has leading technical algorithms, high-quality customer resources, and impressive overseas business growth. With 2024H1, the company's domestic and overseas revenue was 1.25/0.289 billion yuan respectively, +12.62%/+41.67% year-on-year, and gross margin was 51.9%/73.56%, respectively. The increase in the share of overseas business with high gross margin will help increase the company's profit level.

The MLED industry has entered a period of rapid growth. The company lays out MLED ahead of schedule and achieved rapid growth

Currently, the LED display industry is developing towards small pitch and micro pitch (MLED), promoting the gradual entry of LED into the consumer market. According to TrendForce data, the global small-pitch LED display market is 4.1 billion US dollars in 2022, and is expected to reach 7.4 billion US dollars in 2027. As of 2023Q4, the cost of P<1.5 pitch screens dropped to 0.027 million/m2 (compared to 0.048 million/m2 in 2023Q1). COB packaging technology has gradually become cost-effective in the P1.2 and below markets, and plays a key role in reducing MLED costs and expanding incremental space. Future cost reduction will drive MLED to accelerate penetration. As the core component of LED displays, the display control system will also benefit from the rapid growth of the MLED market. The market size in 2023 is 1.329 billion US dollars, and it is expected to reach 2.098 billion US dollars in 2030. The company has deployed COEX control systems to enable various emerging scenarios such as naked eye 3D, virtual shooting, LED cinemas, etc., and has deployed MLED related technology ahead of schedule. 2024H1, and the company's MLED-related revenue is growing rapidly.

The ultra-high-definition video industry has long and heavy snow, and the video processing system business has entered an acceleration channel

The video processing industry benefits from technology such as 3D, HDR, 4K/8K Ultra HD, AR/VR, etc., as well as the promotion of ultra-high definition industry policies, and its core position continues to improve. According to data from the China Business Industry Research Institute, in 2022, the scale of China's ultra-high-definition video industry will be about 3, and it is expected to break through to 5 in 2025. In 2023, the company's video processing system sales volume was +44.5% year-on-year, and the CAGR for the past 3 years was 62.5%.

Launch MLED chips, MLED testing equipment, etc., to deepen cloud business layout and strengthen core competitiveness

Relying on years of deep technical cultivation, the company has significant advantages on the core algorithm side. It launched the industry's first MLED display ASIC control chip & high-speed interface chip. At the same time, MLED core testing equipment has been applied in batches. A cooperation agreement was reached with Megachi in 2023 to accelerate the development of the MELD industry. In terms of cloud business, it will benefit from the rapid development of the IoT industry for a long time; as of June 2023, Nova Cloud has served more than 34,000 customers in the industry, and has accumulated over 0.55 million display operation and maintenance, covering 185 countries around the world.

Investment advice: The company is expected to have revenue of 3.961/5.038/6.41 billion yuan in 2024-2026, net profit to mother of 0.83/1.125/1.511 billion yuan, EPS of 8.98/12.17/16.35 yuan/share respectively, and current stock price corresponding PE is 18/13/10 X; the company is a leading LED display solution company, with leading advantages in technology and customers, and initial coverage, giving it a “buy” rating.

Risk warning: Technology research and development risks, risk of product planning not meeting market demand, risk of losing core technical personnel, macroeconomic downturn affecting downstream demand, and industry competition intensifies.