Event: Company Releases 2023 Annual Report, 2

In 023, we achieved operating income of 3,054 billion yuan, an increase of 40.49% over the previous year; realized net profit of 607 million yuan, an increase of 96.96% over the previous year; realized deducted non-net profit of 588 million yuan, an increase of 97.84% over the previous year. The performance achieved high growth, which was in line with market expectations.

The gross margin has increased significantly, and the technical strength of the product is leading. In 2023, the company achieved high revenue growth in various business lines, and the gross margin increased significantly: revenue from LED display control systems, video processing systems, and cloud-based information publishing and management systems increased by 30.19%, 58.76%, and 16.65% year-on-year, and gross margin increased 5.69pcts, 4.02pcts, and 7.63pcts. We believe it is mainly due to the company's leading product technology strength, and the cost of superimposed raw materials such as chips and PCBs decreased. In 2023, demand for LED display products in commercial displays, stage rental, stadiums, outdoor advertising, and enterprise applications continues to increase, and emerging application scenarios such as XR virtual shooting, naked eye 3D, all-in-one computers, and cinema displays are emerging. The company continues to follow the development direction of new technologies in the industry such as 4K/8K ultra-high-definition video and MLED, and has successfully launched a series of ultra-high-definition display control and video processing products, MLED core inspection equipment and MLED core integrated circuit products that support 4K/8K video processing, which have been widely recognized by customers.

Optimize the R & D personnel structure and continue to increase R&D investment. By the end of 2023, the number of R&D personnel in the company reached 1,176, an increase of 34.09% over the previous year, accounting for 42.41% of R&D personnel. Master's degree accounts for 29.93% of R&D personnel, an increase of 2.57 pcts over the previous year, and the R&D personnel structure was optimized. In 2023, the company invested 442 million yuan in R&D, an increase of 38.47% over the previous year. The company's COEX series control system project and control system product line platform project are in progress. Display ASIC solutions, video splicing servers, and 2-in-1 controller projects are in the verification stage, and technology research and development maintains a leading edge.

Strong dividends and positive feedback to shareholders. On April 16, 2024, the company reviewed and passed the “Proposal on the 2023 Profit Distribution Plan”, considering that the company's undistributed profits and capital reserves in 2023 were sufficient, and that the company's total share capital was still small after listing, and that the interests and reasonable demands of investors, especially small and medium-sized investors, it is proposed to distribute a cash dividend of 97 yuan (tax included) for every 10 shares based on the company's current total share capital of 51.36 million shares (tax included); based on capital reserve shareholders 10 shares were increased by 8 shares, for a total increase of 41.088 million shares.

Investment suggestions: The company is deeply involved in the field of MLED video image display control, using the high adhesive card positions of display control systems and screen manufacturers, and the cost-effective advantages of going overseas to accelerate the release of high-margin video equipment products; forward-looking layout of MLED inspection equipment and chips to explore the core value of the entire industry chain. We predict that the company will achieve revenue of 41.35, 5.711, and 7.825 billion yuan in 2024-2026, and achieve net profit of 8.89, 13.10, and 1,874 billion yuan, corresponding PE of 25x, 17x, and 12x, maintaining the “increase” rating.

Risk warning: MLED industry development falls short of expectations; video equipment falling short of expectations; risk of macroeconomic fluctuations; risk of lifting the ban on restricted stocks