Visionox(SZ:002387)2024-02-18 16:00Investment Rating - The report initiates coverage with an "Outperform" rating for Visionox (002387 CH) [4][10]. Core Views - The OLED industry is entering an upcycle, with expectations of rising prices and improved capacity utilization leading to a gradual recovery in operating profits. The projected operating profit margins for 2025 are 4% for the listed company, 12% for Hefei Visionox, and 9% for consolidated operations, approaching the margins of comparable companies [2][10]. - The ViP technology, a proprietary RGB self-alignment pixelization technology, significantly enhances product performance while reducing costs. This technology is expected to lower cash costs as domestic material breakthroughs continue [1][71]. Demand and Supply Dynamics - Demand for OLED displays is driven by the continuous penetration of smartphones, with OLED penetration rates expected to reach 61% by 2025. The report anticipates that global smartphone shipments will grow by 3% in 2024, with a notable increase in the adoption of OLED in lower-end models [5][7][16]. - The supply side indicates that domestic manufacturers are making progress in replacing imports, although capacity increases are limited in the medium term. The report highlights that the domestic market share of AMOLED smartphone panels has reached 45% as of Q3 2023, with Visionox holding a 10% share [28][53]. Financial Projections - The report forecasts revenues of RMB 5.87 billion, RMB 8.12 billion, and RMB 9.32 billion for the years 2023, 2024, and 2025, respectively, with a significant recovery in net profit expected by 2025 [10][69]. - The target price for Visionox is set at RMB 11, corresponding to a 2x price-to-book ratio for 2025, indicating a potential upside from the current price of RMB 7.20 [2][10]. Technology and Innovation - Visionox is focusing on the development of Micro LED technology, which is expected to become a key player in the AR market. The company has invested in a leading Micro LED firm, which has achieved significant production milestones [11][76]. - The ViP technology not only enhances the effective luminous area and pixel density but also allows for a significant increase in device lifespan and brightness, while reducing preparation costs [71][76]. Strategic Partnerships - Visionox maintains close collaborations with leading domestic smartphone manufacturers, which positions the company to benefit from the increasing market share of its core clients. The return of Huawei to the market is expected to further boost OLED demand [10][68].