Event

Fujing Technology released a report for the third quarter of 2022: the operating income in the first three quarters of 2022 was 606 million yuan, an increase of 11.25 percent over the same period last year. The net profit of returning to the mother was 187 million yuan, an increase of 16.35 percent over the same period last year. The net profit after deducting non-return was 181 million yuan, an increase of 18.35 percent over the same period last year.

Main points of investment

Profitability remains stable and investment in research and development continues to increase

The company's Q3 realized operating income of 212 million yuan in a single quarter, an increase of 10.83 percent over the same period last year, an increase of 8.16 percent over the previous quarter, a net profit of 68 million yuan, an increase of 14.68 percent, an increase of 3.03 percent, and a net profit of 67 million yuan, an increase of 22.96 percent and 8.06 percent respectively. In terms of profitability, Q3 single-quarter gross profit margin was 58.08% (month-on-quarter-1.65pct), the overall gross profit margin reached 56.93% in the first three quarters, and the net profit rate in the first three quarters reached 32.76%, which remained stable and at a high level. In terms of expense rate, Q3 company's sales, management, finance and R & D expenditure rates were 1.34%, 11.32%,-4.24% and 10.14% respectively, of which R & D expenses increased by 64.05% year-on-year and 46.20% month-on-month.

The leading position of nonlinear optical crystal is stable, and the demand in overseas market is stronger.

In the first half of 2022, due to the influence of the epidemic, there was a certain underoperation rate in the downstream terminal application enterprises, and the company's crystal components business was affected by the slowdown in domestic market demand. However, in the same period, the demand in overseas markets is relatively strong, and the company actively distributes overseas markets, and its export business has increased greatly compared with the same period last year. As one of the largest production enterprises in the field of nonlinear optical crystals, the company continues to increase its code research and development and broaden its product line while maintaining its leading position. While consolidating and upgrading laser optics and communication optical products, the precision optical business has cut into the emerging market for high-end optical components. When the company's space is tight, it rents a factory building of nearly 10,000 square meters, which is mainly used for ultra-precision optical development. At the same time, lease another factory to expand the production capacity of existing products. In the laser device business, some of the device products independently developed by the company break the monopoly situation of foreign manufacturers and realize domestic substitution.

With the enrichment and improvement of the product system, the company has gradually become one of the leading suppliers in the industry that can provide laser customers with "crystal + optical elements + laser devices" one-stop integrated services, and has accumulated rich customer resources, and its products have been widely used by domestic and foreign well-known laser companies, such as coherence, spectral physics, fast, IPG, Lumentum, big laser, Yingnuo laser, Ruike laser, Jepter and so on. The company and the major shareholder property structure to carry out joint research and development of some projects, some of the results have been landed.

Profit forecast

We believe that while stabilizing the leading position of nonlinear optical crystals, the company is actively exploring new application fields of products, making continuous efforts in the fields of optical communications, AR, lidar, semiconductor equipment, optical testing equipment, analytical instruments and scientific research, and the comprehensive competitiveness is expected to be further enhanced. It is predicted that the company's income from 2022 to 2024 will be 7.70,8.84,999 million yuan respectively, and its EPS will be 0.49,0.55,0.62 yuan respectively. The current stock price corresponding to PE will be 32,28,25 times respectively.

Investment rating.

Risk hint

The lower-than-expected risk of demand in downstream application areas, the risk of intensified market competition, the risk of rising prices of raw materials, and the risk of exchange rate fluctuations.