Guoxing Optoelectronics: Good Prospects For Outdoor Display And General Lighting In The Future

Investment points

In September 15th, we went to Foshan star Au Optronics Co and assistant general manager of the company.

The company is now in the leading position in the field of LED packaging: the company is currently one of the top three LED packaging enterprises in mainland China, and is also the largest SMD LED packaging company.

Mainly engaged in R & D, production and sales of LED devices and components, products are widely used in consumer electronics, home appliances, computers, communications, flat panel displays, lighting engineering.

High brightness LED has broad prospects for development: high brightness LED has become the mainstream product, and the global market scale has increased by 820% from 95 to 07 years.

In the future, notebook computers, LCD TV, car tail lights and third brake lights, and general lighting market will become a new field of sustainable development of high brightness LED. Especially, the general lighting market has a government subsidy policy for efficient lighting, which can significantly reduce the difference between high brightness LED and fluorescent lamps, and then accelerate the penetration of high brightness LED in the market.

The most LED packaging industry in mainland China

Gross profit margin dropped slightly, but remained at a higher level: in the first half of the year, due to the company's expansion of market share of SMD LED, the price of products was appropriately lowered, and the gross profit margin of the device dropped by 0.19 percentage points compared with the same period last year. However, compared with other businesses, the gross profit margin of the device still showed a 32.72% higher gross profit margin, mainly because of the rapid growth of TOP LED, which increased by 193.33% over the first half of the year, becoming the main profit growth point of the company.

At present, TOP LED is mainly applied to two fields: home appliance controller and display screen.

The company believes that the gross profit margin of SMD LED will remain at this level in the future, so the change in the gross margin will not be too great.

Short term inventory pressure is greater, but with the release of chip capacity will be eased: in the 2 and 3 quarter of this year, as the downstream air-conditioning enterprises usher in the peak season, GREE, Midea and other major customers of the company want to increase supply, resulting in an increase of 52.71% in storage in different places than in the beginning. Due to the shortage of upstream chips and the trend of price increase, the company actively increased chip inventories, resulting in an increase of 106.73% in this part of inventories compared with the beginning of the year. The two reasons led to a higher inventory in the first half of the year, a 72.42% increase compared with the beginning of the year.

The company believes that the current inventory level is only temporary, and the chip capacity will be released in the 2 and 3 quarter next year. When the chip price will go down sharply, the company's product price will also be reduced accordingly, and the stock pressure will be alleviated before.

At the same time, with the help of chip capacity release and downstream product price reduction timing, the company believes that it is more conducive to the promotion of outdoor display and the entry of general lighting market.

At present, we are committed to packaging the main industry, and will extend the industrial chain to the upstream in a timely manner. For China's LED enterprises, the vertical industry chain will become the future development trend.

At present, the company owns the stock of Xu Rui photoelectric 15%, a chip enterprise. At present, the factory building of the company is already being renovated, and the MOCVD11 upstream equipment of the chip has been ordered, of which 1 are for R & D, 10 are for production, and will be put into operation early next year, mainly producing high-power chips.

Although the company said it would extend the industry chain to the upstream in due course, the company is still committed to the development of the main business of LED packaging, and is determined to be bigger and stronger in this field.

Investment proposals and profit forecasts: we believe that if chip prices fall on schedule in the 2 and 3 quarters of next year, on the one hand, they will benefit the LED downstream packaging and application fields. The company will undoubtedly benefit from the leading industry of the packaging industry in China. On the other hand, the general lighting field with large growth space is currently developing at a high level because of the high upstream cost, and the decline in chip prices will accelerate the start-up of the market, and will also prompt the company to enter this key development area quickly.

We expect that the EPS in the 10, 11 and 12 years will be 0.71, 1.08 and 1.47 yuan respectively, corresponding to PE 48.28, 32.09 and 23.41 times respectively.

In view of the current high stock price, the "holding" rating is given.