Optical optoelectronics industry investment report: The future is expected to usher in both performance and valuation improvements

Benefiting from the increasing demand in the downstream industry (sports, culture, advertising) and the explosive growth of small-pitch displays, the LED display industry has been increasingly prosperous since the initial industry reshuffle was completed in 2013. While mergers and industry chain integration are developing in depth, mainstream companies in the industry have conducted many explorations and innovations in the operating model of LED displays, and are expected to see both performance and valuation improvements in the future.
The LED display industry has entered an era of major mergers, and companies with revenue of 3 billion to 4 billion will appear in the next three years. The CR of the LED display industry is 6^14%, and the industry concentration is obviously low. Since 2013, the industry's prosperity has bottomed out and mergers and acquisitions in the industry have gradually increased. Based on our understanding of the industry chain and the statements of entrepreneurs in the industry, we judge that the LED display industry has entered the era of large-scale mergers. Listed leading companies will use the capital market to kick off large-scale mergers and acquisitions and reorganizations in order to build market value.
The explosive development of small-pitch display technology is expected to overturn the ceiling of the industry. Compared with DLP and LCD splicing display technology, small-pitch displays have comprehensive advantages in display effects, energy consumption, maintenance costs, etc. The continued decline in the price of small-pitch lamp beads is expected to promote continued explosive growth in the industry. The scenario application of small-pitch displays will be divided into three stages:
1. Replace DLP and LCD wall-mounting in the high-end display field;
2. Enter high-end indoor display venues such as shopping malls and airports;
3. Enter the high-end civilian market; each stage is expected to release tens of billions of market space. Since this year, small-pitch manufacturers have had full orders and tight production capacity. The industry is expected to continue to maintain a growth rate of more than 80%, with the market size exceeding 5 billion yuan.
The three major downstream industries (sports, stage performing arts, and outdoor advertising) are booming, the industrial chain extension is natural, and the extension expectations are clear. The rapid development of the downstream industry has not only boosted the prosperity of the LED display industry, but also raised the expectations of LED display companies to integrate the upstream and downstream of the industry chain. Currently, mainstream companies in the industry are making strategic layouts in the fields of sports, stage entertainment, outdoor advertising, etc. Related targets are expected to deeply benefit from this industry trend, bringing greater valuation flexibility.
From asset-heavy manufacturing to asset-light scenario operation, the LED display operating model continues to upgrade. As the application scenarios of LED displays continue to expand, the traditional model of simply selling hardware can no longer adapt to the industry situation. Mainstream companies in the industry have begun to try LED display scene operations (hotels, communities, etc.). The new operating model is expected to significantlyImprove the performance flexibility of relevant companies.