MTC intends to terminate the spin-off IPO of its subsidiary for the 5 billion yuan production expansion project

On the evening of March 17, MTC announced the termination of the spin-off and IPO of its controlling subsidiary on the ChiNext board; it plans to invest RMB 5 billion in the Nanchang High-Tech Industrial Development Zone to build a Mini LED chip and RGB fine-pitch LED display module project.

Termination of MTC Optoelectronics' spin-off and IPO on the ChiNext Board

It is reported that on the evening of February 28, MTC issued an announcement stating that its controlling shareholder, Nanchang Zhaotou, and its acting-in-concert party, Gu Wei, signed a "Framework Agreement on Share Transfer" with Shenzhen Capital Operation Group Co., Ltd. and its wholly-owned subsidiary, Shenzhen Yixin Investment Co., Ltd. Nanchang Zhaotou and Gu Wei intend to transfer 19.73% of the shares, with the total transfer price amounting to RMB 4.368 billion.

The transferee in this transaction, Shenzhen Capital Operation Group Co., Ltd., is a state-owned asset auxiliary performance platform and a professional state-owned capital operation platform specially established by the Shenzhen State-owned Assets Supervision and Administration Commission to promote the transformation of state-owned asset management from managing assets to managing capital and to advance the overall capital operation strategy of Shenzhen's state-owned assets.

The announcement on the evening of March 17 showed that MTC will terminate the matter of spinning off its controlling subsidiary, Jiangxi MTC Optoelectronics Technology Co., Ltd. (hereinafter referred to as "MTC Optoelectronics"), for an IPO on the ChiNext Board of the Shenzhen Stock Exchange. MTC stated that recently, the company's controlling shareholder and actual controller plans to transfer the company's actual control rights . If this matter is successfully completed, the actual controller of MTC Optoelectronics will also change, and MTC Optoelectronics will no longer meet the conditions for an initial public offering on the ChiNext Board . After careful consideration, the company has decided to terminate the spin-off listing of MTC Optoelectronics on the ChiNext Board and withdraw the relevant application documents.

The company stated that terminating the IPO process for MTC Optoelectronics will not adversely affect the production and business operations of the company or MTC Optoelectronics, nor will it hinder the implementation of the company's overall strategic plan. As a leader in the LED packaging industry, MTC Optoelectronics possesses outstanding technical strength and advanced manufacturing capabilities in the three mainstream application areas of LED backlighting, LED lighting, and LED displays . It is capable of implementing the proposed projects through self-owned funds or other forms of financing, thereby further expanding the scale of the company's core business and enhancing its profitability.

MTC stated that when conditions are ripe, the company will choose an appropriate time to restart the spin-off and IPO process. Meanwhile, the company commits that within one month after the announcement of terminating the spin-off and listing of MTC Optoelectronics on the ChiNext Board, it will not plan any major asset restructuring (including spin-off listings).

Investment of 5 billion yuan in projects such as Mini LED chips

At the same time, MTC announced a plan to invest 5 billion yuan in the Nanchang High-tech Zone to build a Mini LED chip and RGB small-pitch LED display module project.

It is reported that in June 2017, the company signed an investment agreement with the Nanchang High-Tech Industrial Development Zone Management Committee to invest in and build an LED Epitaxy and chip production base integrating R&D, production, and sales. Since its establishment, the project has achieved a production capacity of 650,000 pieces/month for 4-inch GaN and gallium arsenide chips in the compound semiconductor LED field. The products cover the full range of compound semiconductor LED applications (lighting, backlighting, and display). Meanwhile, the new RGB small-pitch LED display module factory built by the company in the Nanchang High-Tech Industrial Development Zone has been basically completed and is expected to start production in the second half of 2022.

The latest announcement shows that the total investment for this project is 5 billion yuan, with equipment investment accounting for approximately 2.5 billion yuan. The project plans to purchase 52-cavity MOCVD equipment and corresponding production capacity chips and supporting equipment for the production of GaN Mini LED chips, while adding 300-500 production lines for small-pitch LED display modules using COB technology. The project is expected to complete equipment installation and commissioning and officially commence operations in 2023.

Mini LED has become the main technical direction in the field of new LED displays, and future production capacity demand will see explosive growth. MTC stated that with the development of Mini/Micro LED new display technologies, Mini/Micro LED direct-view displays are the primary and key leading products, making the expansion of the company's ultra-high-definition Mini LED production capacity urgent. In response to the rapid rise of the future Mini LED market, the company plans to further invest in and construct Mini LED chip and RGB display module projects, optimize the product structure, and enrich and improve the categories and application fields of LED chips. The monthly production capacity (converted to 4-inch wafers) is expected to reach 1-1.1 million pieces after production begins.

The company will leverage its advantages in the full LED supply chain layout, establish refined management processes, and fully utilize the synergies of various business segments to turn the Mini LED chip and RGB display module projects into new profit growth drivers. In the future, the company will further enhance its intelligent manufacturing capabilities, strengthen its core competitiveness, and help Nanchang build the largest competitive LED industry cluster in China, providing strong support for its electronic information industry.

MTC Performance and Planning

In addition, the performance forecast recently disclosed by MTC shows that the company's net profit for 2021 is expected to be between RMB 230 million and RMB 330 million, a year-on-year (YoY) decrease of 87% to 81%, mainly due to the provision for impairment of receivables from Evergrande Group and its member enterprises.

In recent years, the company's core business has continued to grow steadily. It is not only an industry leader in the traditional LCD TV ODM sector but has also gradually expanded to become a provider of comprehensive software and hardware integrated solutions in the smart display field.

MTC stated that in 2020, the net profit attributable to shareholders of the listed company was RMB 1.763 billion, with a three-year compound annual growth rate of 43.00%. In 2021, except for the recovery issues of receivables such as notes receivable and accounts receivable related to Evergrande Group and its member enterprises, the company's main business maintained strong profitability.

In the future, the company will continue to focus on the development of its core business. On one hand, it will consolidate its industry position in smart display and smart home networking ODM services, gradually expand market share, and continuously extend into emerging display fields such as office, commercial, education, and healthcare, thereby building an industrial cluster for the smart display Industry. On the other hand, the LED supply chain will be the strategic focus for the company's industrial expansion.

With LED chips as its foundation, the company has further expanded into packaging manufacturing. Leveraging years of technical expertise and product development, it has secured a position in advancing Mini LED micro-pitch display technology, while also establishing a comprehensive layout in Mini LED backlight technology, product solutions, supply chain support, and application markets. Through close collaboration with internationally renowned manufacturers such as BOE, Skyworth, Konka, TCL, Samsung, TPV, and Sharp, the company has gradually secured orders and commenced shipments.

MTC will leverage its vertical integration advantages across the upstream and downstream of the supply chain, continuously increase the contribution of the LED industry to the company's performance, achieve dual-wheel drive with its core business segment of smart display, and promote comprehensive development of its main business.