Event: The company released its 2022 annual report and the first quarter report of 2023. The company achieved revenue of 508 million yuan for the full year of 2022, a decrease of 7.35%; realized net profit of 117 million yuan, an increase of 1.48% over the previous year; realized non-net profit of 108 million yuan, a decrease of 3.42% over the previous year; the company achieved revenue of 139 million yuan in Q1 2023, an increase of 21.69% over the previous year, an increase of 16.36% over the previous year; achieved net profit of 29 million yuan over the previous year, an increase of 1.77% over the previous year, an increase of 29.14% over the previous year; the deduction of non-net profit of 108 million yuan, a year-on-year increase of 29.14%; achieved deduction of non-net profit of 108 million yuan, an increase of 29.14% over the previous year Guimu's net profit was $28 million, up 1.61% year on year and 28.76% month on month.

The decline in sales of industrial automation equipment affected revenue in '22, and Q1 performance grew steadily in '23: The company's revenue declined year-on-year in 2022, mainly due to the year-on-year decline in the company's industrial automation equipment product sales, which dragged down the overall revenue decline. By product: In 2022, the company's industrial automation equipment business had revenue of 390 million, a year-on-year decrease of 18.26%, with a revenue ratio of 76.83%, a gross profit margin of 42.62%; technical service business revenue of 76.83%, a year-on-year increase of 45.77%, revenue of 15.25%, gross profit margin of 44.29%; automation equipment parts business revenue was 40 million yuan, an increase of 127.47% over the previous year, accounting for 7.93% of revenue, and a gross profit margin of 46.80%. The company's comprehensive gross margin in 2022 was 43.21%, up 2.28pct year on year; net interest rate was 22.96%, up 2.02pct year on year. Gross margin and net profit margin increased year on year, mainly due to:

(1) Affected by changes in the company's product structure and exchange rate, the company's overall gross margin increased; (2) the increase in government subsidy revenue received by the company led to an increase in overall net interest rate. In terms of expenses, the company's sales, management, R&D, and financial expenses rates for the full year of 2022 were 4.73%/7.12%/9.50%/-2.80%, respectively. The year-on-year changes were +0.93/+1.72/+1.15/-2.94pct, respectively. Changes in the company's financial expenses are mainly due to an increase in interest income and an increase in exchange benefits. The company's Q1 2023 performance increased year-on-year. As the macroeconomic economy gradually improves and the number of in-hand orders gradually increases, the company's performance is expected to grow steadily.

Deeply involved in the field of optical automation testing, the AR/VR business provides growth momentum: the company is deeply involved in the field of optical automation testing and assembly. The technical advantages and first-mover advantages in the segment are obvious, and it has a certain competitive position in the industry. At the same time, the company's main customers are mainly high-quality leading customers, and it has established long-term and stable cooperative relationships with major customers such as Apple, which has continuously won recognition from leading customers, establishing the company's competitive advantage within the industry. The AR/VR business is the company's main business, and the company has made great progress in the field of testing supporting headsets such as AR/VR. The company's core products are mainly optical recognition test equipment and optical induction test equipment. The AR/VR camera inspection system being developed by the company has already entered the prototype verification stage. The system is used to test the camera module performance of consumer electronic terminals such as AR/VR and mobile phones. With the continuous maturity of virtual reality technology and the guidance of national policies, the company expects the virtual reality industry to develop rapidly in the next 5 years. The company continues to follow the trend of new consumer electronics virtual reality products to speed up the AR/VR penetration process. With the release of new Apple MR products, the company's orders from Apple are expected to increase, and the company's optical inspection equipment performance is expected to grow further.

Actively lay out the semiconductor market, and semiconductor equipment creates a second growth curve: According to SEMI, global semiconductor equipment sales will grow to 140 billion US dollars by 2030, and there is plenty of room for growth.

The company's product line is actively expanding and expanding into semiconductor and other fields. The company mainly lays out semiconductor packaging testing equipment. The downstream chip types mainly include miniled, micro-LED, optical communication (such as high-power laser chips), etc., and the types of test equipment mainly cover AOI equipment and sorter equipment. The company focuses on allocating strategic resources to semiconductor and other industries to provide customers with more professional, efficient and energy-saving equipment and technical services to meet rapidly changing product manufacturing needs. In 2022, the company used its own capital of RMB 5 million to establish a wholly-owned subsidiary, Suzhou Zhifangda Semiconductor Equipment Co., Ltd., to further expand the semiconductor sector. The company's optical semiconductor equipment achieved sales revenue in 2020. Major customers include Hisilicon, Hisense, etc., which are used in communication and data storage. At the beginning of 2023, the company's investment in technology R&D projects and customer development results in new fields such as semiconductors were further demonstrated. The number of orders from semiconductor customers in the mini-LED field and other semiconductor customers increased, and the growth rate was quite obvious. Due to the maturity of the products, the gradual increase in market demand, and the smooth progress of the project, priority has been given to the release of chip sorters for the company's semiconductor equipment products.

The company's six-sided optical defect detection equipment for laser chips has been shipped in small batches and is mainly used in the field of optoelectronic chips. The company takes into account the expansion of original equipment and research and development in new fields, expands into semiconductor display application fields, and gradually expands its market share to achieve import substitution under the premise of maintaining the advantages of domestic market segments. The semiconductor equipment sector is expected to start the company's second growth curve.

First coverage, giving an “increase in holdings” rating: The company's core business is automated testing equipment and automated assembly equipment business. It is mainly used in the optical, electrical, mechanical and other functional testing processes of customer products in the fields of consumer electronics, e-cigarettes, industrial electronics, automotive electronics, semiconductors, etc., as well as product assembly processes, to help customers achieve semi-automation and full automation of production lines and improve production efficiency and product yield.

The company adheres to the “3×2” strategy, which is to carry out in-depth expansion and extension development plans on three tracks (consumer electronics, semiconductors, atomized electronics) and two key processes (automated testing, automated assembly).

In addition to focusing on the traditional consumer electronics field, the company has also expanded application scenarios for emerging electronic products such as atomized electronics, AR/VR, and automotive electronics. With the continuous development of the company in the field of optical automated testing, the continuous expansion of the semiconductor market layout, and the release of new Apple MR products, the company's orders are expected to increase further, and the company's performance is expected to reach a higher level. The company's net profit for 2023-2025 is estimated to be 161 million yuan, 222 million yuan, and 290 million yuan respectively; EPS is 2.57 yuan, 3.54 yuan, and 4.64 yuan respectively; PE is 36X, 26X, and 20X respectively.

Risk warning: the risk of macroeconomic fluctuations, the risk of downstream demand falling short of expectations, the risk of technology development and iterative upgrading, and increased market competition.