New stock preview | Sivision Electronics sprints for "A+H" listing: Revenue surpasses 10 billion, significant leader effect

Under the wave of digital transformation, the demand for information display and interaction in various industries has significantly increased. Commercial display devices, as key media for information presentation, have a continuously growing adoption rate. For example, in the education sector, interactive smart tablets can achieve real-time interaction and improve teaching efficiency, thus they are widely used; in the conference sector, the development of digital office and smart conferences demand higher clarity and interactivity, prompting companies to purchase interactive smart tablets to enhance collaboration efficiency. In this context, related companies have also become more and more active. For example, Shiyuan Electronics, which is currently sprinting for listing on the Hong Kong Stock Exchange. On June 17th, Guangzhou Shiyuan Electronic Technology Co., Ltd. (hereinafter referred to as "Shiyuan Electronics") submitted its listing application to the Hong Kong Stock Exchange, planning to list on the main board of the Hong Kong Stock Exchange, with CICC and GF SEC (Hong Kong) as joint sponsors. The company is an expert in smart control technology and also one of the world's leading commercial display device companies. The company has established a leading position in the market for interactive smart panels (IFPD) and LCD main control boards serving the education and enterprise services sectors. It is worth mentioning that Guangzhou Shiyuan Electronic Technology (002841.SZ) was listed on the A-share market on January 19, 2017, with a total market value of approximately RMB 17.3 billion as of the close on June 19. With the advancement of industry trends, Shiyuan Electronics is obviously poised to become an "A+H" stock, but looking at the fundamentals, what is the company's investment value? Leading in educational tablets, with revenues exceeding tens of billions Shiyuan Electronics' development began in 2005, starting with LCD main control boards and gradually expanding into the high-growth potential smart control components field covering white goods, automobiles, energy storage, and Siasun Robot & Automation components, among other diverse scenarios. At the same time, the company has also built an ecosystem covering smart terminals and specific scenario solutions, providing a comprehensive product portfolio including commercial display products and systems, audio-visual AV equipment and systems, computing solutions, and other supporting hardware, as well as vertically focused artificial intelligence-driven (AI-driven) software solutions for core application scenarios, with a focus on education and enterprise service scenarios. In terms of revenue structure, Shiyuan Electronics' revenue is mainly divided into three major segments: smart terminals and applications, smart control components, and software and other services. During the reporting period, smart terminals and applications accounted for over 40% of the company's revenue, while revenue from smart control components fluctuated in the range of 20% to 30%. So far, Shiyuan Electronics has become the absolute leader in educational tablets. According to Frost & Sullivan data, by 2024, the company's Seewo brand of educational interactive smart tablets holds a market share of 17.5%, leading the global market; the MAXHUB brand of conference interactive smart tablets holds a market share of 25.0% in China and 9.9% globally, taking the first and second positions, respectively; and the LCD main control board holds a market share of 23.8%, ranking first globally. It is reported that Shiyuan Electronics has also established deep cooperation with Microsoft, jointly launching a variety of hardware devices certified by Microsoft Teams, including the world's first three-camera interactive screen XBoard V7 series conference tablet with Windows 11 IoT, providing integrated solutions for diversified enterprise scenarios. Under the leadership effect, Shiyuan Electronics' revenue scale is also considerable. According to the prospectus data, from 2022 to 2024, the company achieved operating revenues of RMB 20.99 billion, RMB 20.173 billion, and RMB 22.401 billion, respectively, steadily increasing its overall revenue scale. In terms of profitability, it has been relatively volatile. From 2022 to 2024, Shiyuan Electronics achieved net profits of RMB 2.121 billion, RMB 1.40 billion, and RMB 1.036 billion, entering a period of "short-term pain" in profitability decline. At the same time, the company's gross profit margin has also declined, reaching 26.2%, 24.5%, and 20.9%, respectively. Shiyuan Electronics stated that the decline in gross profit margin from 24.5% in 2023 to 20.9% in 2024 was mainly due to (i) the higher revenue growth of smart control components with lower gross profit margins compared to smart terminals and applications; and (ii) the gross profit margin of smart terminals and applications decreased from 30.2% in 2023 to 25.3% in 2024. Of course, the pressure on profit is also related to high expenses in MAXHUB investment, overseas expansion, research and development, etc. During the reporting period, the company's sales expenses increased from RMB 1.188 billion in 2022 to RMB 1.205 billion in 2024, while research and development expenses increased from RMB 1.281 billion in 2022 to RMB 1.540 billion in 2024, both of which are at a large scale. From this perspective, the significant decline in short-term profitability of the company is largely due to strategic investment (MAXHUB, overseas expansion, research and development) and results from external environmental challenges. This has certain temporary and strategic characteristics. Once the company's MAXHUB successfully transitions from a period of high investment to a period of harvest, overseas expansion goes smoothly, new business incubation has bright spots, then the company is expected to see a dual increase in profitability and valuation, making it a significant investment value. Steady industry growth, significant leadership effect Driven by technological advancements in commercial display devices and steady growth in market demand, the global commercial display device market is also showing steady growth. According to Frost & Sullivan data, the global commercial display device market's operating revenue increased from RMB 157.6 billion in 2020 to RMB 189.4 billion in 2024, with a compound annual growth rate of 4.7%. Specifically, in 2024, the operating revenue of educational interactive smart tablets, conference interactive smart tablets, LED displays, and digital signage reached RMB 20 billion, RMB 9.1 billion, RMB 39.4 billion, and RMB 38.2 billion, respectively, with compound annual growth rates of 6.4%, 4.3%, 20.0%, and -1.8%. Subsequently, driven by the industry's digital transformation fostering new demands, technological innovation driving demand growth, continuous expansion of application scenarios, and policy support, it is expected that by 2029, the global commercial display device market's operating revenue will reach RMB 265.2 billion, with a compound annual growth rate of 7.0% from 2024 to 2029. The revenue for educational interactive smart tablets, conference interactive smart tablets, LED displays, and digital signage is expected to reach RMB 30.7 billion, RMB 13 billion, RMB 74.5 billion, and RMB 49.1 billion, with compound annual growth rates of 8.9%, 7.4%, 13.6%, and 5.1%, respectively. In terms of competition, the global commercial display device market is relatively concentrated. As of December 31, 2024, there were over 100 market participants globally, leading to intense market competition. In 2024, the top three brands in terms of revenue for educational interactive smart tablets accounted for 36.0% collectively, while Shiyuan Electronics' Seewo brand ranked first with a market share of 17.5% globally and 53.8% in mainland China, presenting an "one strong and many weak" situation overall. However, it is important to note that competition is intensifying, with technology giants such as Huawei (IdeaHub), Microsoft (Surface Hub), Google, and others stepping up their efforts; at the same time, traditional projection/conference equipment companies (such as Poly, Zoom Rooms ecosystem partners) and other traditional players are accelerating their transformation. Therefore, for the purpose of listing in Hong Kong, Shiyuan Electronics stated in the prospectus that the funds raised this time will primarily be used to enhance the company's research and development capabilities, accelerate the company's international expansion, strengthen its competitiveness in overseas markets, and be used for strategic investments and acquisitions in domestic and international markets to support long-term growth and competitiveness. In conclusion, it is evident that Shiyuan Electronics, as a leader in the educational tablet industry, has growth potential and possesses long-term core competitive advantages. The current situation of "increasing revenue but not increasing profit" is the combined result of the company's proactive strategic investments and external environmental challenges, showing certain temporary and strategic characteristics. Once the company's investment in MAXHUB successfully transitions from a high investment period to a harvest period, overseas expansion progresses smoothly, new business incubation shows promising results, the company is expected to see a double increase in profits and valuation, making it a significant investment opportunity.