Core view: We expect Huiding Technology's 2024-2026 revenue to be 5.279, 6.256, and 7.363 billion yuan, respectively, and net profit to mother of 0.696, 0.955, and 1.11 billion yuan respectively. Using a comparable company valuation method, we expect Huiding Technology's target market value of 33.422 billion yuan in 2024, with a target price of 72.97 yuan. For the first time, coverage is given a “buy” rating.

Fingerprint and touch products are leading in the industry, and the company continues to strive to reach new heights. 1) The mainstream solutions for fingerprint recognition cover the three categories of capacitive, optical, and ultrasonic. Among them, capacitive solutions are mature but difficult to achieve off-screen recognition; optical solutions are mainstream in the full-screen era and are gaining popularity as OLED penetration increases; ultrasonic fingerprinting has outstanding advantages in recognition efficiency and safety, and has great potential in the future as costs decrease. 2) At present, the company has become the world's largest provider of fingerprint solutions, and can provide a full range of products including capacitors, under-screen optics, and ultrasonic solutions. Among them, optical fingerprint products will account for nearly 70% of the Android phone market in 2023; ultrasonic fingerprint sensors will be used on a scale of 24H1 in Vivo and other terminal products, and is expected to be commercialized on a large scale in 24Q4. 3) In terms of touch control, the company's touch and active pen solutions support small/medium/large size products. It is a mainstream supplier of folding screen touch and active pen solutions for domestic mobile phone brands. Automotive touch products are also commercially available on models such as BYD and Xiaopeng.

A variety of new products are about to be released, and the company's diverse layout is spread all over the world. 1) The company is moving towards the world's leading integrated IC design company, and the product matrix continues to be rich. 24H1's new products, such as next-generation under-screen light sensors, automotive-grade touch button chips, health sensors, and electrochemical simulation front-end AFE chips, are progressing smoothly, and many new products are expected to be gradually released in 24H2. 2) In terms of automotive electronics, the company's automotive electronics business had a compound growth rate of about 180% in 2020-2022. It has formed three major product layouts: automotive touch chips, car audio software and hardware solutions, and digital car keys. Customers include BYD, Geely, NIO, and Xiaopeng, which continue to open up space for the company's growth.

Risk warning: risk of industry fluctuations, risk of market competition and shrinking profit margins, raw materials and foundry risks.