Investment logic:

The company is mainly engaged in the research and development, design, production and sales of masks, and is one of the earliest and largest providers of professional products and services for masks in China. In 2024, the company will achieve revenue of 1.112 billion yuan, a year-on-year increase of 20.35%; The net profit attributable to the parent company was 172 million yuan, a year-on-year increase of 28.80%.

Flat panel display: The company is a global leader, and its share continues to increase due to capacity expansion & precision upgrades.

LCD has further shifted to the mainland, the trend of large size continues to advance, the penetration of small and medium-sized OLED has accelerated, and the display upgrade has driven the growth of mask area and number of layers, and LTPO has more than 4 layers more than LTPS. The company's domestic display mask ranks first and fifth in the world, with a global market share of 11% in 2023. The company has full coverage of domestic panel customers, and has realized the R&D and mass production of 8.6 generations of high-precision TFT masks, 6 generations of medium and high-precision AMOLED/LTPS masks, and it is expected that the company's flat panel display business will achieve operating income of 1.096/1.370 billion yuan in 25/26 years, a year-on-year increase of 24.97%/25%.

Semiconductors: The company's production expansion is imminent, and the process and scale are expected to make further breakthroughs. According to SEMI, in the global semiconductor mask market, the scale of wafer fabs' own mask factories accounts for 65%, and the scale of independent third parties accounts for 35%. Photronics, Japan's DNP, and Japan's Toppan occupy more than 80% of the market share of semiconductor masks, and domestic manufacturers have accelerated the layout of technology & production capacity, and the company has realized the mass production of semiconductor chip masks at the 180nm process node, and the 150nm process node has passed customer testing and certification and carried out small-scale mass production. It is estimated that the company's semiconductor chip business will achieve operating income of 293/439 million yuan in 25/26, a year-on-year increase of 45.05%/49.83%.

The company issued shares to specific targets to raise a total of no more than 1.2 billion yuan, which was used to invest in the "high-precision mask production base construction project phase I" and "high-end semiconductor mask mask production base construction project phase I" projects. Before the raised investment funds were in place, the company invested in advance with self-raised funds, and the "high-precision mask production base construction project" of Foshan production base was successfully capped on January 6, 2025.

Earnings Forecast, Valuation and Rating

We predict that the company will achieve net profit attributable to the parent company of 1.71, 2.48 and 366 million yuan respectively from 2024 to 2026, an increase of 27.65%, 45.36% and 47.17% year-on-year, considering the company's high growth, we give the company a 40 times valuation in 2025, a target price of 32.38 yuan / share, and give the company a "buy" rating.

Risk Warning: The

launch of new downstream display panel products is weaker than expected, semiconductor technology breakthroughs and customer expansion are less than expected, and production capacity ramp-up is less than expected.