Event. On March 23, the company issued the "Announcement on Foreign Investment". According to the announcement, the company plans to invest in the construction of a high-generation high-precision photomask production base project in Xiamen, and plans to invest 100 million yuan to set up a wholly-owned subsidiary, Xiamen Luwei Optoelectronics Co., Ltd., as the main body of the project, with a total investment of 2 billion yuan.

A wholly-owned subsidiary in Xiamen was established to increase the production capacity of high-generation high-precision masks. The company has been in a leading position in the field of technology through independent research and development, scientific and technological innovation and other means, occupying a certain share in the industry, and with the innovation and development of downstream industries, facing a broad space for development. The company plans to invest in the construction of a high-generation high-precision photomask production base project in Xiamen, and plans to invest 100 million yuan to set up a wholly-owned subsidiary, Xiamen Luwei Optoelectronics Co., Ltd., as the main body of the project, mainly producing G8.6 and below AMOLED and other high-precision photomask products, with a total investment of 2 billion yuan, and the source of funds is its own funds or self-raised funds. This investment will help increase the production capacity of high-generation high-precision masks, so as to further expand the scale of operations to improve market competitiveness and profitability. According to the company's announcement, since the beginning of 2025, the downstream demand has been strong, and the company's production line put into operation in 2024 is expected to have a good production capacity release in the first quarter and even the whole year. With the quarterly release of new production capacity in 2025, the continuous optimization of the internal product structure and the further embodiment of the overall scale effect, the performance in 2025 is expected to achieve sustained growth.

The product matrix is abundant, and the production capacity is constantly climbing. The company's product layout is comprehensive and the product matrix is rich, which can support the needs of downstream panels and semiconductor customers in a wider range. According to the company's announcement, the company is the only manufacturer in China that can cover the G2.5-G11 flat panel display mask; At the same time, the company can cover all current display technologies, including LCD, LTPS, LTPO, AMOLED, Mini-LED, Micro-LED, silicon-based OLEDs, etc., as well as FMM photomasks. In the field of semiconductors, the company and Jiangsu Luxin's layout of the process node is above 28nm, and the progress in the domestic third-party mask manufacturers is relatively fast, the first phase of Jiangsu Luxin semiconductor mask project will begin to send samples of 90-100nm process node semiconductor mask in the first quarter of 2025, and trial production of 40nm process node semiconductor mask products in the second half of 2025, the first phase of the project is expected to contribute a small part of the revenue in 2025, and further increase in 2026. Subsequently, we will start to promote the semiconductor mask project of the second phase of the 40-28nm process node. We believe that with the company's continuous deepening of mask product technology development and continuous expansion of semiconductor products, the company's business expansion and localization process will be further accelerated.

Profit Forecast and Investment Rating: We predict that the company's net profit attributable to the parent company in 2024-2026 will be 1.92/2.48/307 million yuan respectively, and the corresponding PE of the current stock price will be 32/25/20 times respectively.

Risk warning: the demand of flat panel display and semiconductor industry is less than expected; No risk of substitution of technologies such as masks; volatility risk in the macroeconomic environment; Trade frictions exacerbate risks.