Demand is picking up, domestic LED packaging and testing price increase: Recently, China's largest chip maker Sanan Optoelectronics decided to increase the price of some small and medium-sized products by 10%, while Cinda Optoelectronics, Amp Optoelectronics and Mulinsen LED manufacturers will RGB lamp beads prices Up 5%, this is the third price adjustment after the price adjustment in March and May. In 2013-2015, the average price of LED bulbs replacing 60W was 30.74%, 23.36%, and 11.59%, respectively. The average price of LED bulbs replacing 40W decreased by 19.25%, 17.88% and 14.52%. The annual price decline was obviously slow, especially after 15 years. After the price of LED products in the year, many domestic manufacturers have transformed or reduced production capacity. Since the supply side has been shrinking and the growth rate of package size has declined this year, the overall supply and demand relationship of the LED industry will gradually improve, with the cost of raw materials and labor costs. Rising, this price adjustment is conducive to the improvement of LED manufacturers' profitability. LED penetration is expected to increase, small pitch or burst: In 2015, global LED lighting penetration rate reached 27%, and maintained an upward trend. We believe that the domestic LED lighting penetration rate is slightly higher than the global penetration level, about 30%, there is still considerable room for development. In 2015, the LED packaging market in mainland China was 8.8 billion US dollars, a year-on-year increase of 2%. In 2016, the demand for lighting manufacturers to replenish stocks came out. It is estimated that the LED packaging market in mainland China will be US$9.3 billion in 2016, a year-on-year increase of 5%. Generally, the smaller the dot pitch is, the more the number of lamp beads used in the unit square is. Therefore, the development of the LED small pitch market has increased the demand for LED lamp beads. At present, the small pitch LED display has entered the market growth period, according to LEDinside Data, in 2016, the number of small-pitch LEDs will reach 29 billion granules. In 2021, the small-pitch LED consumption will reach 189.8 billion granules, and the annual compound growth rate will reach 46%. The output value is also expected to grow from 300 million US dollars in 2016 to 2021. In the year of 800 million US dollars, the annual compound growth rate can reach 21%. The outbreak of small spacing will further stimulate the demand for lamp beads. The concentration of LED industry is expected to be further strengthened, and some LED manufacturers will eventually benefit. The outdoor screen and vehicle market are expected to form new market opportunities: With the continuous improvement of the LED display technology level, the display effect is continuously enhanced, and the LED display technology advancement also greatly reduces the operator's construction cost and the later operation and maintenance cost. Therefore, LED display has become the new darling of outdoor media. At the same time, the trend of high resolution and high density of outdoor display is gradually rising. The average distance is from P10 to P6. The annual growth rate of LED outdoor media screen market in 2008-2014 is 31.4%. It is expected that the consumption of outdoor LEDs will grow from 93.6 billion in 2015 to 286.4 billion in 2021, with a compound annual growth rate of 20%. The 13th Five-Year Plan pointed out that the new energy automobile industry will be vigorously developed, and the market share of domestic automobile manufacturers will gradually increase. Currently, automotive LED suppliers are mainly OSRAM, Lumileds, Hongli and so on. The rise of the automotive lighting market provides new market opportunities for LED manufacturers. Investment strategy: With the improvement of supply and demand in the LED industry and the improvement of industry concentration, we are optimistic about the long-term development prospects of LED. The industry logic of “Big Evergrande†will benefit related companies. Therefore, we mainly recommend Hongli Zhihui. It is estimated that the net profit of the mothers in 2016-2018 will be 2.59/3.54/491 million yuan respectively, and the corresponding EPS will be 0.39/0.53/0.73 yuan respectively, corresponding to PE being 40/29/21 times. Maintain the company's "strongly recommended" rating. Risk warning: increased competition in the industry, risk of falling product prices, and risk of falling gross margin. Range Hood,Auto Cleaning Range Hood,Hood Range For Kitchen,Cooker Range Hood Shandong Sangle Group Co.,Ltd. , https://www.sangle-group.com