Matters:

Company announcement: The company received the “Notice of Designated Development” issued by Celis Group Co., Ltd., and the company has once again become a supplier of automotive optical solutions for Cyrus Motors to supply smart cockpit display products for new models. The targeted project is expected to be mass-produced and delivered within 2025, and the project life cycle is expected to be 3 years.

Guoxin Home Appliance's opinion: 1) The company has once again obtained the Cyrus smart cockpit display, which confirms that the company's products meet market demand; 2) The company's automotive business has obtained 7 fixed points. Among them, the Wanjie M9 has already entered the mass production and delivery stage. It is reported that the current number has exceeded 80,000, and delivery is gradually accelerating. In the future, it is expected that the remaining fixed sites will be mass-produced and delivered one after another, injecting new growth points into the company; 3) the company's B-side display business welcomes favorable policies, and cultural tourism equipment updates will help the company seize more markets; the C-side business has achieved initial results through active adjustments, and the fundamentals of the main business continue to be optimized.

4) The company's laser display technology is leading the world, B-side business demand has recovered and profits have improved; the smart cockpit business has received continuous recognition and recognition from leading car companies in the industry, promoted consumer market education, accumulated rich experience in the smart cockpit field, and has a strong leading edge in terms of positioning; the company also has mature product solutions and original technical solutions for headlights and AR-HUD, and the automotive business is expected to create a second growth curve. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 17/30/380 million, +64%/+76%/+27% year-on-year, corresponding to PE = 45/26/20x, maintaining the “superior to market” rating. 5) Risk warning: industry competition intensifies; downstream customer expansion falls short of expectations; industry demand recovery falls short of expectations.

Commentary:

It also received the Celis smart cockpit display designation, confirming that Guangfeng automotive products meet market demand. The company first obtained Celis certification in January 2023 to supply smart cockpit display products for the M9 model. This time, it is also a smart cockpit display product, verifying that the company's in-vehicle display applications meet the needs of car companies and consumers. According to the company's new product launch at the Beijing Auto Show in April, it is expected that this product will be a next-generation version of the in-vehicle projection solution, doubling the brightness and resolution, and reducing costs while upgrading the display effect, which is more conducive to adapting the product to models in the lower price range. According to the new product launch plan of Wenjie Auto, it is estimated that the pricing of Guangfeng's designated models will be between the M7 (starting price 249,800 yuan) and M9 (starting price 469,800 yuan). The M7 and M9 both sold more than 10,000 units in April 2024. It is expected that the new models will also bring high sales performance to the company.

The Wanjie M9 surpassed 80,000 units. The company's automotive business accelerated development. The company's first fixed-landing model, the Wenjie M9, entered the delivery period in March 2024, and the 2024Q1 automotive business achieved revenue of 48.03 million yuan. The QQ M9 is entering the accelerated delivery phase, with 6,243 vehicles delivered in March and 13,391 vehicles in April; as of May 11, the cumulative total of the QQ M9 has already exceeded 80,000 units. According to an interview with the president of the BG Smart Car Business Division of the Huawei terminal, the premium M9 Ultra (that is, standard cockpit projection) version accounts for a relatively high share, which also confirms consumers' recognition of in-vehicle projection displays. It is expected that the company's in-vehicle revenue is expected to pick up quickly.

The company has now obtained 7 fixed points, covering the three major business lines of vehicle display, laser headlights and AR-HUD. The company continues to be designated by leading car companies, and the first in-vehicle display product has been delivered and tested by the market

The dedicated business welcomed favorable policies, and the C-side business actively reduced losses. On May 24, six departments including the Development and Reform Commission issued the “Implementation Plan to Promote Equipment Renewal in the Field of Culture and Tourism” to comprehensively improve high-definition equipment upgrades, entertainment equipment updates, independent innovation in film screening technology, and implement large-scale cinema LED screen projection system update plans. The company launched VLED movie screens in June 2023, and installed 8 screens in 2023. As the leading supplier of laser projection in China, the company is expected to seize a large share with the promotion of cinema LED screen renewal plans, with product and customer advantages. Furthermore, Japanese media reported that Panasonic Holdings has decided to sell large-scale commercial projector businesses, and the competitive landscape of the professional display business is expected to be further optimized. In terms of C-side business, the company improves internal operating efficiency through management and business optimization, and is expected to turn losses into profits in the future. The loss of 2024Q1 peak rice decreased by 15 million year on year, and the loss margin decreased by 40.1% compared with the same period, and positive results have been achieved.

Investment suggestions: Further confirmation of market demand, the second growth curve can be expected, maintaining the global leader in laser display technology for “superior than market” rating companies, recovering B-side business demand and improving profits; the smart cockpit business has been continuously fixed and recognized by leading car companies in the industry, promoting consumer market education, accumulating rich experience in the smart cockpit field, and has a strong leading edge in terms of fixed points; the company also has mature product solutions and original technical solutions for headlights and AR-HUD, and the automotive business is expected to create a second growth curve. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 17/30/380 million, +64%/+76%/+27% year-on-year, corresponding to PE = 45/26/20x, maintaining the “superior to market” rating.

Risk warning

Industry competition intensified; downstream customer expansion fell short of expectations; industry demand recovery fell short of expectations.