Small-pitch display enters an explosive period, and external mergers and acquisitions increase valuations

1. Leading companies lead industry growth, and small-pitch displays enter an explosive period

Leyard released its 2015 annual report on the evening of March 17: In 2015, the company achieved Operating income was 2.023 billion yuan, a year-on-year increase of 71.42%, of which the net profit attributable to shareholders of the listed company was 331 million yuan, a year-on-year increase of 105.05%. It plans to distribute a cash dividend of 0.7 yuan (tax included) to all shareholders for every 10 shares. Excluding the factors of consolidation, the company's LED small-pitch performance has been brilliant. The company announced that LED small-pitch has achieved rapid growth (a three-year compound growth rate of more than 70%), and the global market share of LED small-pitch has reached more than 50%.

Unilumin Technology announced its performance report on February 28. It is expected that the company will achieve operating income of 1.314 billion yuan in 2015, a year-on-year increase of 35%, of which the net profit attributable to shareholders of listed companies is 117 million yuan, a year-on-year increase of 93.39%.

Traditionally, it is believed that small-pitch displays are mainly used in government, military and public service fields. Due to price factors, it is generally believed that the space in the commercial market has yet to be developed. Judging from industry trends, with the decline of raw materials such as lamp beads and the advancement of technology, the penetration rate of small-pitch products in the commercial market will gradually increase. In the past, the market was worried about the insufficient market space in the government and military fields and the penetration progress in the commercial market, and was worried about the short-lived growth of the small-scale market. Leyard announced the company's income distribution in small-pitch displays from 2012 to 2015. Overall, sales in the government, military, and industrial and commercial industries continued to grow. In addition, the proportion of sales to industrial and commercial enterprises increased steadily, while the proportion of traditional government agencies and the military declined slightly. The gross profit margin of small-pitch displays reached 43.3%. The small-pitch segment entered an explosive period since the end of 2015. We believe that the strong performance of leading companies has dispelled doubts about the growth trend of small spacing in the commercial market, and we are optimistic about the accelerated penetration of LED small spacing in the commercial market.

2. External mergers and acquisitions increase valuation

Both the LED lighting and LED display industries have entered the stage of large-scale mergers and acquisitions in the past two years. Compared with the LED lighting industry, companies in the LED display industry have mostly chosen to enter the media field. Screen equipment manufacturers have relied on years of cooperation with companies in the media field to increase the smoothness of their media business logic. We believe that leading companies will first transform from equipment providers to full solution (system integration, content design, etc.) providers, and eventually become platform companies. There is huge room for future development, and high growth will significantly increase valuations.

In 2015, LED small-pitch displays will usher in the first year of explosive growth. It is recommended to pay attention to companies that have been deeply involved in the LED industry for many years and have technical reserves and comparative advantages.

Leyard: Leading in technology and market share, enjoys domestic channel advantages, acquired American Planar, and integrated overseas channels. Four-wheel drive (LED small spacing, LED display, LED intelligent lighting, culture, sports, education and media) promotes high performance growth.

Unilumin Technology: Leading in technology, the explosion of LED small-pitch products has boosted the gross profit of the company's small-pitch products, leading the market share of overseas high-end performing arts venue segments, and building a high-margin brand in niche markets. Small spacing + high-end creative screens are flying together; external mergers and acquisitions are expected to be strong.