Intelligent weapons and equipment are accelerating, and the release of special optical lenses for military use is expected to increase
The 14th Five-Year Plan proposes speeding up the upgrading of weapons and equipment and the development of intelligent weapons and equipment. Optoelectronic systems are in the front-end sensing process and will benefit from intelligent trends and be applied more widely and deeply. The company's special optical lenses and optoelectronic systems are widely used in major national space missions and high-end equipment such as the “Shenzhou Series”, “Chang'e Moon Exploration”, and “Tianzhou-1”. The core customers include research institutes and enterprises affiliated with the Chinese Academy of Sciences and major military industry groups. In 2021, the company's customized products achieved revenue of 78 million yuan. The trend of intelligent and upgraded weapons and equipment is clear. Special optical lenses are an indispensable part of aerospace engineering, space exploration, and high-end equipment. As one of the most important domestic providers of special optical lenses and optoelectronic systems, the company will face stable and continuous demand in the future, bringing growth to the company.
AI brings the demand for high-quality optical information acquisition, and the field of ultra-high precision optics has huge potential
As the popularity of next-generation information technology represented by AI, cloud computing, and big data continues to accelerate, civil optics is developing in the direction of high definition, networking, and intelligence.
Civilian optical lenses continue to evolve in the direction of high resolution, large magnification, ultra-wide angle, miniaturization, and large aperture (smaller F value). Development in the direction of high definition and low illumination has enabled the Internet of Things and AI systems to collect higher quality information and data, improving system operation efficiency and accuracy. Companies in the field of varifocal lenses with high zoom ratios and long focal lengths are roughly at the same technical level as Japanese companies, ahead of their domestic peers.
In the field of ultra-high precision optics, the shape errors of spherical lenses, aspherical lenses, binary surfaces, off-axis surfaces, irregular lenses and freeform surfaces processed by the company can reach 0.1um, and the surface roughness can reach 1nm, which is at the advanced level in China. In terms of coating technology, the total medium has a high reflective film of < 99%; drift amount <1 nm, uniformity of the whole furnace <5 nm. The company will fully benefit from lens upgrades in the AI era and domestic replacement opportunities in the direction of ultra-high precision optics in the pan-semiconductor field.
Profitability is expected to pick up, increase R&D investment and maintain technological leadership. Facing the adverse effects of the repeated COVID-19 pandemic and the tense global economic situation, the company has risen to the challenge, maintained and increased R&D investment based on core technology, continued to develop new products and new application markets, and accelerated revenue growth. Revenue growth accelerated. Revenue grew at an accelerated pace in 2020-2022, reaching 588 million yuan, 675 million yuan, and 797 million yuan respectively, with year-on-year growth rates of 1.32%, 14.82% and 18.09%, respectively. Net profit of Fumo in 2020-2022 was 51 million yuan, 45 million yuan, and 29 million yuan respectively. The main reasons were as follows: 2020 was mainly due to the epidemic and product restructuring. High gross margin zoom lenses declined significantly. 2021 was mainly due to the increase in depreciation and amortization of fixed assets, increased bank loans and reduced investment income. 2022 was mainly due to depreciation and amortization of fixed assets, increased share payments and reduced investment income. We believe that in the past three years, the company was actually in a large-scale investment period for fixed assets in order to cope with the next high growth in demand in the high-end sector. Depreciation of fixed assets affected short-term profits. As new production capacity is put into operation and product upgrades, the company's profitability will gradually increase.
Through a long-term development process, the company has cultivated a team of high-level R&D and production talents with excellent technological innovation capabilities. In terms of technology, the company has a number of industry-pioneering technologies in large magnification zoom lenses, large aperture transmissive lenses, etc., and has a global competitive advantage. In recent years, the company has continued to increase R&D investment. The R&D investment for 2019-2022Q3 was 38 million yuan, 48 million yuan, 53 million yuan and 42 million yuan respectively. The R&D expenditure rates were 6.47%, 8.18%, 7.78% and 7.99%, respectively. We believe that the company's core technical team remains stable and continues to increase investment in R&D, laying a solid foundation for the company to maintain technological leadership in the specialty optics business.
Profit forecasting
It is predicted that the company's revenue for 2022-2024 will be 797, 10.03, and 1,253 billion yuan respectively, and the EPS will be 0.12, 0.32, and 0.51 yuan respectively. The current stock price corresponding to PE is 212, 84, and 51 times, respectively, giving a “buy” investment rating.
Risk warning
The risk of declining industry sentiment, the risk of special optics applications falling short of expectations, the risk of increased competition in the industry, and rising costs brought about by rising raw material prices.