Hongli Zhihui Group Co.Ltd(300219) LED market demand has warmed up and the company's performance has increased significantly

\u3000\u3000 Hongli Zhihui Group Co.Ltd(300219) (300219)

Event: on January 21, the company released the performance forecast for 2021. The annual net profit attributable to the shareholders of the listed company was 253-293 million yuan, an increase of 172.65% - 215.76% over the same period of the previous year, and the net profit after deducting non recurring profits and losses was 200-24 million yuan, an increase of 267.82% - 341.39% over the same period of the previous year.

LED market demand has warmed up and performance has increased significantly. In 2021, the global economy recovered slightly and the LED market demand recovered. The company fully grasped the industry development opportunities and actively explored the market. The sales scale increased significantly over the same period last year. According to the semi annual report, the expanded production capacity of the company in 2020 has been effectively released, and the LED semiconductor packaging has increased significantly. The company has gradually expanded the production scale according to the market demand, fully integrated internal resources, optimized the main business structure and strengthened technology research and development. The gross profit margin of the company from 2019 to 2021q3 is 18.76%, 21.36% and 22.24%, showing a gradual upward trend, The company's annual performance increased significantly year-on-year.

Expand the miniled packaging capacity and improve the profitability of the company. The company has been at the forefront of China's LED industry technology, focusing on the research and development of mini / micro LED semiconductor display technology. According to the semi annual report, the company's miniled phase I project has been successfully put into operation and provides mass production for mainstream manufacturers in China. The construction of miniled phase II project has been fully started. The total construction area of phase II project is nearly 178400 square meters, and the annual output value is expected to reach 4 billion people's dollars after it is fully completed. According to the information disclosure in the investor relations activity record form of the company on October 28, Miniled phase II will be capped at the end of 2021. With the successful operation of miniled phase I project and the start of phase II construction, the profitability and market competitiveness of the company will be directly improved.

Increase R & D investment and construction to enhance the company's core competitiveness. The company has always focused on the R & D and technical team construction in LED related fields. Through the certification and construction of intellectual property system, the company has mastered a number of core technology patents related to LED packaging. According to the disclosure of the semi annual report, the company has successively won the China Patent Excellence Award, the first prize of Guangdong science and technology, the quality award of Guangzhou Mayor and other awards. In January 2020, the "key technology and industrialization of high luminous efficiency and long life semiconductor lighting" project participated by the company won the first prize of 2019 National Science and technology progress award issued by the State Council of the people's Republic of China. At present, the company has three CNAs laboratories recognized by the state, and one of them is the energy star laboratory authorized by the U.S. EPA. According to the semi annual report, the company has a total of 797 valid patents, including 131 invention patents.

Investment suggestion: we estimate that the company's revenue from 2021 to 2023 will be 4.124 billion yuan, 5.361 billion yuan and 6.702 billion yuan respectively, and the net profit attributable to the parent company will be 289 million yuan, 437 million yuan and 652 million yuan respectively, maintaining the "Buy-A" investment rating.

Risk tip: the prosperity of the industry is lower than expected; Production expansion is less than expected; Market development is less than expected; Product development was less than expected.

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