Key points of investment

A leader in glass structural parts, building a precision manufacturing platform enterprise in the electronics industry: Lansi Technology is a leading manufacturer of intelligent equipment structures and functional parts in the industry. On the basis of glass structural parts, the company develops ceramic, metal, sapphire, plastic and other structural and functional products and smartphone assembly businesses through self-research, acquisitions and cooperation, while expanding from the consumer electronics field to the automotive industry. Currently, it has accumulated Apple, Samsung, Xiaomi, OPPO, Huawei, Honor, Tesla, BMW, Benz, Audi, Volkswagen, BYD, and Ideal Well-known customers in industries such as NIO and Xiaopeng.

In 2023, the company achieved operating income of 54.491 billion yuan, YoY +16.69%; realized net profit to mother of 3.021 billion yuan, YoY +23.42%. In the 1st to 3rd quarter of 2024, the company's performance continued to grow, achieving operating income of 46.23 billion yuan, YoY +36.7%, net profit to mother of 2.37 billion yuan, and YoY +43.7%. In 2015-2023, with the rapid growth of the smartphone and other product markets and the increase in the value of Lansi stand-alone products, Lansi Technology's sales to Apple, the largest customer, increased from 8.3 billion yuan to 31.5 billion yuan, with a CAGR of 18%, accounting for more than 50% of the company's revenue.

Actively grasp the development trend of AI terminals and vertically integrate business: With the rapid advancement of AI technology, according to IDC forecasts, AI mobile phone shipments will reach 0.17 billion units in 2024, with a penetration rate of 15%, and AIPC's new machine shipment penetration rate will exceed 50%. The boom in AI software and hardware market upgrades is expected to benefit companies that lay out new material applications, structural parts, modules, and assemblies in advance. While maintaining its leading position in the glass cover business, Lansi Technology is actively developing touch, sapphire, ceramics and other materials businesses. In August 2020, the company acquired Kesheng Taizhou and Coli Taizhou to enter the mobile phone frame processing business for major customers, becoming another main line of consumer electronics business after glass covers. In 2021, the company invested 3 billion yuan to build the first phase of the smart terminal intelligent manufacturing project in Xiangtan Lansi, entering the smartphone assembly market, and received orders for Xiaomi phones that year. Since then, the company has entered the Xiaomi flagship OEM business, successively OEM the Xiaomi 13ultra and Xiaomi 14 models. The whole machine assembly business grew dramatically in 2023, turning a loss into a profit for the first time.

Vehicle intelligence drives the continuous growth of in-vehicle displays: Under the trend of intelligent automobiles, the number of bicycle displays will increase steadily. According to statistics from Qunzhi Consulting, the total global automotive panel market shipped 0.11 billion pieces in the first half of 2024, an increase of about 11% over the previous year. Omdia expects the automotive display market to reach 0.238 billion by 2030. The company further expanded automotive glass products and other automotive products, and expanded charging piles, precision metal structural parts for power batteries, etc., and the automotive business grew rapidly. In 2023, the company's NEV and smart cockpit business achieved revenue of 4.998 billion yuan, accounting for 9.2% of the company's total revenue, a year-on-year increase of 39.47%, and a gross profit margin of 15.47%. The company has established cooperative relationships with more than 30 domestic and foreign new energy and traditional luxury vehicle brands, covering the entire chain from technology research and development to product supply, which is expected to create a second growth curve outside of the consumer electronics business.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 67.21/85.93/105.06 billion yuan, up 23.3%/27.8%/22.3% year on year, net profit to mother 4.15/5.46/6.8 billion yuan, up 37.2%/31.8%/24.4% year on year, corresponding P/E of 27.3/20.7/16.7 times. As one of the core suppliers in Apple's industry chain, the company has profoundly benefited from the innovation and upgrading of AI terminals and the development of automobile electrification. It was covered for the first time and gave it a “buy” rating.

Risk warning: Consumer electronics recovery falls short of expectations; AI terminal innovation falls short of expectations; NEV sales fall short of expectations.