Incidents:

On March 28, 2023, the company released its 2022 annual report. During the reporting period, the company achieved operating income of 2,174 million yuan, a year-on-year decrease of 5.66%; realized net profit attributable to shareholders of listed companies was 206 million yuan, a year-on-year decrease of 38.84%; net profit attributable to the parent company after deducting non-recurring profit and loss was 169 million yuan, a decrease of 44.54% over the previous year.

Comment:

The consumer electronics industry's prosperity declined in 2022, causing the company's revenue and profits to decline. Affected by various factors such as the COVID-19 pandemic, global inflation, and the war in Ukraine, global economic growth was weak, and shipments of terminal consumer electronics products declined overall, causing downstream panel manufacturers and module manufacturers to decline in demand for polarizers. The company's sales revenue of small and medium-sized TFT products declined to a certain extent. The revenue of the TFT polarizer business in 2022 was 2,029 billion yuan, down 7.46% year on year, gross margin was 19.94%, and down 4.49% year on year. Currently, downstream customers include world-famous terminal brands such as Huawei, Xiaomi, Oppo, Vivo, Amazon, and Lenovo. As the consumer electronics industry picks up in the second half of '23, the company's consumer electronics business is expected to improve marginally.

Actively lay out the VR field and cultivate new profit growth points. The company took the lead in deploying Pancake folding optical path optical film based on its excellent customized optical film design capabilities, multi-layer optical film precision bonding experience, and extremely small size high-precision cutting processing capabilities, making it the first domestic manufacturer with mass production capacity. According to TrendForce data, global VR equipment shipments in 2022 were about 8.58 million units, a decrease of 5.3% over the previous year; due to the introduction of various new devices, VR device shipments are expected to rise back to 10.35 million units in 2023, an increase of 20.6% over the previous year.

The large-scale, high-definition and multi-screen integration of in-vehicle displays is unstoppable, and the company's automotive polarizer business is expected to achieve rapid growth. According to Omdia's forecast, the global automotive display market will reach 9.5 billion US dollars in 2023 and will exceed 10 billion US dollars by 2024, reaching 10.5 billion US dollars.

At present, the company's automotive iodine polarizers have stabilized at 95℃ x 500H, and have achieved mass production results in the rear-mounted vehicle market, and higher temperature-resistant products are still being developed.

First coverage, giving a “buy” rating. We are optimistic about the company's core competitiveness in the polarizer field and the investment opportunities brought about by the recovery of the consumer electronics industry. The company is expected to achieve revenue of 31.11/41.88/5.427 billion yuan respectively in 2023-2025, and the net profit of the mother is 344/436/556 million yuan respectively, and the corresponding PE is 24.29/19.18/15.03 times respectively.

Risk warning: consumer electronics demand continues to be sluggish, and VR industry development falls short of expectations