Incidents:

The company published its 2022 annual report and the first quarter report of 2023. In 2022, the company achieved revenue of 198 million yuan, a year-on-year decrease of 2.41%; the net profit returned to the mother was 39 million yuan, a year-on-year decrease of 25.95%.

In the first quarter of 2023, the company achieved revenue of 48 million yuan, a year-on-year decrease of 5.44%; the net profit returned to the mother was 112 million yuan, an increase of 13.63% over the previous year.

Comment:

The market share of laser galvanometer control systems remained leading, and the laser servo control system business was gradually expanded.

In 2022, the company's laser processing control system achieved revenue of 146 million yuan, which was basically the same as the previous year, and the share of domestic shipments remained around one-third. The galvanometer control system is mainly used in the field of laser precision microprocessing. Previously, the 3C consumer electronics industry accounted for a relatively high share of the company's revenue structure. In '22, the company vigorously promoted the application of products in high-end fields such as photovoltaics, lithium batteries, and aerospace, hedging the adverse effects of the 3C industry's downturn. The servo control system business achieved revenue of 1,0511 million yuan throughout the year and is still in the marketing stage. The servo control system is used in laser macro processing. The market size is higher than the galvanometer control system, or it may become an important growth point for the company's future performance.

Continue to promote research and development of high-precision digital galvanometer to help domestic products replace them. China's high-precision digital galvanometer market has long been dominated by foreign products, and there is broad scope for domestic substitution. The company focused on the development of galvanometer motors and launched INVINSCAN series and G3 series high-precision galvanometer products based on self-developed technology. Some performance indicators have reached the level of similar products abroad. The market size of galvanometer is also higher than that of galvanometer control systems. Through self-developed galvanometer, the company achieves software and hardware collaboration to further expand growth space.

Gross margin remains high, and net interest rates are expected to recover in '23. The company's gross margin in 2022 was 60.46%, and has stabilized at around 60% in the past three years. The number of employees in the company increased by 61 throughout the year, of which the number of R&D personnel increased by 35, bringing the company's R&D expenses rate to 21.36%, an increase of 7.75 pcts over the previous year, which is the main reason for the decline in the company's net interest rate. It is expected that the current expansion of the company's personnel will be basically completed, and the cost rate for the period after the number of employees stabilizes is expected to decrease, increasing the company's profitability.

Profit forecast: The company's net profit for 2023-2025 is expected to be 64 million, 96 million, and 135 million dollars. The corresponding PE is 48, 32, and 23 times, covered for the first time, and given a “increase in holdings” rating.

Risk warning: The recovery in downstream sentiment fell short of expectations; new market development fell short of expectations