Event

The company released its third quarterly report for 2021: Q1-Q3 realized revenue of 3.061 billion yuan in 2021, + 45.28% year-on-year, and net profit of 217 million yuan, + 242.35% compared with the same period last year. 21Q3's revenue was 1.057 billion yuan, + 36.09% from the same period last year,-7.93% from the previous year, and 26.13% from the same period last year. The net profit of 21Q3 was 75 million yuan, + 214.78% year-on-year,-6.25% month-on-month and 92.31% year-on-year. The performance exceeded expectations.

Comment

LED semiconductor packaging growth is obvious, the performance improvement is bright. With the recovery of LED market demand in 2021, the company gradually expanded its production scale according to the market demand. The semi-annual report revealed that the demand for LED semiconductor packaging orders was strong, the capacity utilization rate was 83.97%, and the comprehensive product yield was 97.05%. 21Q3 has a gross profit margin of 21.62% (- 0.42pct) and a net sales margin of 6.09% (- 0.73pct). During the reporting period, the net profit of returning to the mother was 217 million yuan, an increase of 242.35% over the same period last year.

Mini LED packaging capacity expansion, driving the company's profitability. The semi-annual report reveals that the first phase of the company's Mini LED project has been successfully put into production and provides mass production for domestic mainstream manufacturers; the construction work of the second phase of the project has been fully started, with a total construction area of nearly 178400 square meters, with an estimated annual output value of 4 billion yuan after reaching full production. Mini LED is the company's high gross profit margin product, about 40%, with the company's Mini LED capacity expansion, is expected to drive the company's overall profitability.

Expense rate control is robust. In 2021, the Q3 sales expense rate was 2.81% (+ 0.65pct), and the management expense rate was 5.27% (+ 1.27pct). The R & D expense rate is 5.18% (+ 0.3pct), and the financial expense rate is 0.41% (+ 0.11pct). The control of expense rate is basically sound.

Investment suggestion: the net profit of the company from 2021 to 2023 is estimated to be 2.94 / 3.83 / 510 million yuan respectively. The corresponding PE was 27.13 / 20.81, respectively. Cover for the first time, giving a "buy" rating.

Risk tips: market expansion is not as expected, product development is not as expected, and so on.