Summary of the Conference Call for Nanji Guang Company Overview - **Company**: Nanji Guang - **Industry**: Display technology, specifically focusing on backlight modules for gaming consoles and other electronic devices Key Points Financial Performance - In Q2 2025, Nanji Guang achieved a gross margin of 29.60% and a net margin of 20.40%, indicating continuous improvement in performance [2][3] - Revenue for the first half of 2025 reached 397.5 million yuan, a year-on-year increase of 244.67% [3] Strategic Transformation - The company has shifted its focus from a heavy reliance on the mobile supply chain to diversified applications in gaming, smart wearables, tablets, laptops, and automotive displays [4] - The market structure has transitioned from primarily domestic sales to a balanced approach of domestic and international sales, with an increase in high-value products [4] Partnership with Nintendo - Nanji Guang has been the exclusive supplier of backlight modules for Nintendo's Switch 2 since 2020, with the console selling over 5.82 million units by the end of June 2025 [2][6] - The partnership is expected to last 5-8 years, with the company having developed a unique ultra-thin light guide plate production process that optimizes power consumption by 25% [6][9] Market Demand and Capacity - Future market demand for Switch 2 is projected to peak at over 20 million to 30 million units, with sufficient production capacity in place (200,000 units per month in Shenzhen and 500,000 units per month in Yichun) [10] - The company is prepared to meet peak demand and has established a solid supply position due to stringent supply chain audits by Japanese companies [10] Competitive Landscape - Despite competition from other suppliers, Nanji Guang maintains a strong position due to high technical barriers and has developed next-generation technologies to reinforce its core supplier status [11][12] - The company is also exploring new product projects with Nintendo and has received inquiries from HP and other brands for laptop projects [13] Future Development Strategy - Nanji Guang's five-year strategic plan includes deepening its presence in the display industry while expanding into gaming, laptops, automotive, and AI display interfaces [15] - The company is accelerating its internationalization efforts to capture opportunities in the global market, particularly in high-margin segments [14][16] Production and Technology - The company is currently in the small-batch development phase for Mini LED products, which are expected to be a significant growth area [21] - Nanji Guang is also focused on reducing power consumption to enhance battery life in future products, with ongoing technical advancements [25] Shareholder Returns - The company aims to provide returns to shareholders through performance improvements and is considering dividend distributions and stock incentives [19] Accounts Receivable - The company has a significant amount of accounts receivable, with domestic payment cycles averaging four months and international orders taking about four months for payment [23] Production Capacity Utilization - Current production capacity utilization is at 50%, with potential demand from high-end clients like Dell, Lenovo, HP, and Amazon [24] OLED vs. LCD Technology - The Switch 2 utilizes LCD technology due to its advancements in contrast and color range, with no immediate plans to switch to OLED screens [24] Additional Insights - The company has a strong patent portfolio with over 300 patents and has invested 6.39% of its revenue in R&D over the past three years [4] - The Japanese market is characterized by long lead times and stable supplier relationships, which Nanji Guang has successfully navigated [8]

Group 1: Company Strategy and Market Focus - The company focuses on new consumer trends and the iteration of consumer electronics, particularly in the esports and gaming sectors, aiming to develop high-difficulty products for leading clients [2] - The company is also exploring new display fields with growth potential, such as automotive and AI products [3] Group 2: Product Development and Market Opportunities - The company’s entry into handheld gaming products is driven by high production standards from clients like Nintendo, a strong sales base from the Nintendo Switch, and the high profit margins in the esports and gaming segments [4] - The Nintendo Switch 2 has shown promising pre-sale performance, with the company meeting stringent requirements for its backlight module products [5] Group 3: Financial Performance and Projections - Despite a revenue decline in 2024, the company turned a profit due to increased production volumes and cost-reduction measures, with significant growth observed in Q1 2025 [7] - The company’s profit margins are expected to improve further due to a higher proportion of high-end clients and products, alongside the scale effects from increased production [7] Group 4: Supply Chain and Client Relationships - The company emphasizes technological iteration to maintain stable partnerships with key clients, ensuring reasonable profit levels and a solid supply chain position [6] - The company has established a strong influence in the industry through its long-term cooperation with major clients and the successful development of ultra-thin technology [5]

Financial Performance - In 2024, the company reported a comprehensive sales gross margin of 20.47% and a net profit margin of 10.06% [1] - In Q1 2025, the comprehensive sales gross margin increased to 25.15%, with a net profit margin of 18.07% [2] - The significant decline in revenue in 2024 was attributed to intensified competition in overseas markets, slower new product rollout, increased expenses, and extended accounts receivable periods [2][3] Strategic Focus - In 2025, the company plans to reduce or eliminate its traditional display terminal business, with Q1 revenue primarily coming from the backlight module business [2][4] - The strategic focus for 2025 is on "focusing on core (modules), specializing, and moving up the industry," emphasizing the development of display module business and accelerating the automotive display sector [4] Growth Opportunities - The company anticipates a revenue growth of 40%-60% in display modules for 2025, aiming for a net profit of approximately 170 million yuan [4] - The display module business grew by 35% year-on-year in 2024, with MiniLED display modules experiencing a doubling in growth [5] - The automotive display business is identified as a second growth curve, with products already in the sampling phase and beginning mass shipments [6] Industry Outlook - The display industry is entering a rapid growth phase, driven by national subsidy policies and the accelerated penetration of MiniLED technology [5] - The global shipment volume in the large-size display market remains stable at around 200 million units, with the industry expected to expand further with advancements in MiniLED, MiniRGB, and MicroLED technologies [7][8]

Core Viewpoint - The company Nanji Guang has successfully transformed its business model from primarily mobile backlight modules to larger-sized screen backlight modules, resulting in a significant turnaround in financial performance for 2024, with a revenue of 457 million yuan and a net profit of 20.62 million yuan, compared to a loss of 305 million yuan in 2023 [1][2]. Group 1: Business Transformation - Nanji Guang has shifted its focus from mobile backlight displays to a broader range of applications, including tablets, laptops, automotive displays, and home entertainment, creating a comprehensive product matrix [2][3]. - The company has established long-term partnerships with major display module suppliers and has successfully entered the supply chains of globally recognized brands such as Nintendo, Lenovo, Huawei, and Xiaomi [3]. Group 2: Market Positioning - The company has positioned itself as a core supplier of backlight modules for the upcoming Nintendo Switch 2, which features a 7.9-inch LCD screen with a resolution of 1080p, indicating a strong foothold in the mid-to-large size backlight market [4]. - The anticipated global sales of the Switch 2 are projected to reach 15 million units in 2025, with Nanji Guang's backlight modules expected to contribute approximately 600 million yuan in additional revenue, representing over 30% of its total revenue for 2024 [5]. Group 3: Industry Trends - The company is poised to replace Japanese and Korean suppliers due to its rapid response capabilities and cost advantages, while also planning to expand into Mini/MicroLED products to align with industry trends [7]. - The strategic focus on "technology upgrades + scene expansion" is expected to drive significant revenue growth in the mid-to-large size backlight business over the next three years, potentially elevating the company to the top tier of global backlight module suppliers [7].

Group 1: Core Projects and Investments - A total of 10 projects were signed with a total investment of 2.37 billion yuan, focusing on electronic information, new energy vehicle components, and high-end equipment manufacturing [1] - The high-precision optical components project, with an investment of 1.1 billion yuan, aims to produce 2 million non-spherical glass pieces per month by 2024, serving major clients like Sunny Optical and DJI [2] - The expansion projects for automotive components, totaling 2.5 billion yuan, will enhance the production capacity of lightweight and high-strength structural parts, benefiting major automotive manufacturers [3] Group 2: Industry Development and Upgrades - The electronic information industry is set to strengthen its supply chain by attracting leading companies and enhancing the production of key optical components [2] - The new energy vehicle sector is expected to achieve a new high in local supply rates through the collaboration of parts manufacturing and vehicle development [3] - High-end equipment manufacturing is being empowered by smart manufacturing initiatives, with projects focusing on hydraulic filters and 3D vision industrial robots [4] Group 3: Investment Ecosystem and Collaboration - The signing of projects marks a shift in the investment strategy of the Jin'an District, moving from policy-driven to ecosystem-driven approaches [5] - Strategic investors are collaborating with Jin'an to establish cooperative sub-funds, integrating capital investment with industry cultivation [5] - The district aims to optimize the business environment to attract more quality projects and enhance economic development [6]

Group 1: Financial Performance - In 2024, the company's operating revenue reached 5.875 billion CNY, a year-on-year increase of 68.91% [3] - The net profit attributable to shareholders turned from a loss of 436 million CNY in 2023 to a profit of 56.82 million CNY in 2024, representing a growth of 113.05% [3] - The net cash flow from operating activities increased by 41.90%, reaching 203 million CNY [3] - The weighted average return on equity improved from -28.91% in 2023 to 4.60% in 2024, an increase of 33.51 percentage points [3] Group 2: Business Segments - The traditional main business (FPC and backlight modules) generated 3.8 billion CNY in revenue in 2024, a year-on-year growth of 12.60% [4] - The revenue from the computing power business reached 1.988 billion CNY in 2024, a staggering year-on-year increase of 5,303.30% [5] - In Q1 2025, the traditional main business achieved revenue of 860 million CNY, maintaining stability compared to the previous year [4] Group 3: Strategic Initiatives - The company has focused on internal reforms, capacity optimization, and cost control to enhance operational efficiency and transition FPC business to the mid-to-high-end market [4] - The company is committed to a major customer development strategy, supplying to well-known smartphone manufacturers such as H Company, OPPO, VIVO, Xiaomi, and Honor [4] - The company is actively pursuing the "green computing" initiative and plans to build a diverse and heterogeneous green computing industry in key national hubs [6] Group 4: Market Outlook and Challenges - The soft board business is expected to benefit from the AI wave, with increasing demand for AI smartphones and devices [9] - The company is optimistic about the future of the soft board business, with a significant reduction in losses and an increase in gross margin to around 7% in Q1 2025 [9] - The recent U.S. tariff policies have not negatively impacted the soft board business, which is currently thriving in the domestic market [15] Group 5: Financing and Cash Flow - The company has successfully established diversified financing channels to support the capital needs of the computing power business [19] - The cash flow model for computing power services involves upfront costs for equipment procurement, with a collection period of approximately 4 to 6 months [12] - The company is actively pursuing strategic partnerships with state-owned enterprises and listed companies to enhance its financing capabilities [20]

Core Viewpoint - The global LCD panel industry is undergoing significant changes due to capacity expansion, technological iteration, and supply chain restructuring, with Chinese manufacturers like BOE and TCL Huaxing emerging as dominant players, reshaping the global landscape [1] Group 1: Industry Capacity and Market Share - Chinese panel manufacturers have increased their capacity share from 20% in 2016 to over 60% in 2024, and it is expected to exceed 70% by 2025 [1] - In the TV and monitor panel sectors, Chinese manufacturers account for over 60% of shipments, with a significant lead in the large-size market [1] - The market share of Chinese panel companies in the notebook panel segment is currently at 50%, indicating ongoing expansion that pressures South Korean and Taiwanese manufacturers [1] Group 2: Television Panel Market Dynamics - The demand for television panels is expected to remain stable, with 2024 TV shipments projected at approximately 197.8 million units, a year-on-year increase of about 1.2% [3] - Domestic brands like TCL and Hisense are rising in global rankings, now positioned as the second and third largest TV brands [4] - The average size of TV panels is projected to increase from 51.5 inches in 2024 to 52.2 inches in 2025, driven by growing demand for larger panels [5] Group 3: Production Strategies and Supply Chain - The importance of production control strategies is highlighted, especially in response to demand fluctuations, with a focus on maintaining supply-demand balance [6] - The average utilization rate of the industry is volatile, necessitating adjustments in production capacity to stabilize supply and demand [6] - Domestic companies are increasingly taking over the polarized film market as Japanese manufacturers exit, indicating a shift in the supply chain [9][10] Group 4: Mergers and Acquisitions - The market is witnessing significant consolidation, with LG Display's transfer of its Guangzhou factory to TCL Huaxing expected to drastically reduce LG's panel shipments while boosting TCL's [7] - Potential acquisition targets include the 8.6-generation line of Xi'an Rainbow Optoelectronics and Sharp's 10.5-generation line, which could enhance market concentration and bargaining power [8] Group 5: Overseas Expansion and New Technologies - Major panel manufacturers are expanding overseas production capacities in countries like Vietnam and Thailand to diversify supply chains and mitigate risks [12][14] - Chinese manufacturers are investing in new technologies, including Mini LED and OLED, to enhance their competitive edge in the market [18] - The industry is expected to focus on five core areas: production control, consolidation, domestic component supply chain enhancement, overseas capacity expansion, and new display technologies [19]