Key investment points

800 Million Spaces is a leading domestic LCD materials company. The main production capacity of LCD panels around the world is located in China, and the concentration continues to increase. The company is expected to benefit from showing the trend of integrated development of the industry in the era of new energy vehicles and smart homes. Furthermore, the company is gradually entering the fields of semiconductors, new displays, etc., and continues to break through in the direction of photoresist resins, OLED materials, and PSPI to obtain a new growth curve, and future growth can be expected.

Deeply integrated into industries such as smart homes and new energy vehicles, showing the expansion of the industry's growth space.

With the continuous development of emerging markets such as the Industrial Internet of Things, digital intelligent factories, and visual artificial intelligence, the display industry is gradually being deeply integrated with fields such as smart devices and smart homes, bringing an unprecedented breadth of space for the development of the industry. Furthermore, the booming development of new energy vehicles, especially the rapid growth of the domestic market, has injected new vitality into the automotive display market. In 2023, due to the declining boom in the global display industry and weak demand for consumer electronics, the global display panel industry's revenue declined slightly year on year. According to Micro Consulting, thanks to the rapid development of AI terminal displays and new energy vehicle displays, the global display panel industry is expected to rebound in 2024. Revenue is expected to increase by about 10% year on year, reaching about 119.7 billion US dollars.

German and Japanese companies are taking the lead in liquid crystal materials, and the competitive pattern of domestic companies is expected to be optimized.

As the core material in LCD panels, liquid crystal materials highly determine the display performance of liquid crystal display devices. Currently, there are five main players in the LCD materials market: Merck of Germany, JNC of Japan, 800 Million Spacetime, Chengzhi Yonghua, and Hecheng Display. As far as domestic manufacturers are concerned, as the LCD panel industry shifts to China, domestic LCD material manufacturers 800 million time and space, Chengzhi Yonghua, and Hecheng display have highlighted their competitive advantages. We believe that the supply pattern of manufacturers in the entire local industry chain is expected to continue to be optimized in the future, and the share of domestic manufacturers will further increase.

The forward-looking layout of IC photoresist resins is expected to accelerate the localization of photoresist resins.

In the first three quarters of 2024, the company achieved operating income of 0.55 billion yuan, a year-on-year decrease of 12.4%, and achieved a net profit of 0.06 billion yuan, a year-on-year decrease of 35.5%. The company continuously optimized the industrial layout, bucked the trend and strengthened R&D innovation, and enhanced long-term competitiveness. The R&D cost rate increased from 6.2% in 2019 to 11.4% in the 2024 three-quarter report. The company is based on the LCD materials business, focusing on IC photoresist resins, OLED materials, PI materials, pharmaceutical intermediates, and lithium battery new energy materials. Among them, photoresist is the main and most critical material in semiconductor lithography processes, and photoresist resin is a top priority for whether IC photoresists can be domesticated. The localization rate is low. Currently, the company has R&D and production capabilities for a full range of KrF photoresist resins, and has cooperated with many leading domestic photoresist manufacturers, and the growth ceiling is gradually opening up.

Profit forecasting and valuation

We expect the company's revenue for 2024-2026 to be 0.781, 1.105, and 1.438 billion yuan, respectively, with year-on-year growth rates of -2.36%, 41.52%, and 30.20% respectively; net profit to mother is 0.096, 0.135, and 0.183 billion yuan, respectively, with year-on-year growth rates of -10.21%, 41.21%, and 34.92%, respectively. Based on the closing price on December 16, 2024, the corresponding PE was 47, 33, and 25 times, respectively. First coverage, giving a “buy” rating.

Risk Alerts

Downstream demand falls short of expected risk; customer risk concentration; R&D progress falls short of expected risk, etc.