Incidents:
The company published its 2022 annual report and 2023 quarterly report. In 2022, the company achieved operating income of 386 million yuan, or -10.13% year on year; net profit of the mother was 119 million yuan, +3.42% year on year. In the first quarter of 2023, the company achieved operating income of 90 million yuan, -19.30% year-on-year /+32.61% month-on-month; achieved net profit of 0.1 million yuan to the mother, -94.67% yoy/-93.96% month-on-month.
Market demand for lasers is weak, putting short-term pressure on performance.
Due to macroeconomic reasons such as the slowdown in global economic growth, demand in the downstream market for lasers is relatively weak. The company's insufficient capacity utilization rate after expanding production led to an increase in corresponding amortization expenses, and short-term performance is clearly under pressure. In 2022, the company achieved operating income of 386 million yuan, -10.13% year on year; achieved net profit of 119 million yuan to the mother, +3.42% year on year; gross margin was 51.57%, -1.25pct year on year. In the first quarter of 2023, the company achieved operating income of 90 million yuan, -19.30% year-on-year /+32.61%; achieved net profit of 0.1 million yuan, -94.67% /-93.96% yoy; gross margin was 28.86%, -21.33pct year-on-year. As a leader in the vertical industry chain of high-power laser semiconductors, the company has formed four categories and series of product matrices composed of semiconductor laser chips, devices, modules and direct semiconductor lasers. The domestic substitution process goes hand in hand with overseas expansion, and is expected to further seize market share through increased production capacity and achieve a steady increase in performance as demand in downstream markets recovers.
Increase investment in R&D to consolidate the technology moat, and expand horizontally and vertically to open up the ceiling for growth.
The increase in the company's cost rate in 2022 was quite obvious. The sales/management/R&D/financial expenses ratio changed +0.74pct/+13.22pct/+10.62pct/-2.65pct respectively. Among them, the sharp increase in the management cost ratio was mainly due to the company's strengthening of management team building and putting new plants into use. The increase in R&D expenses was mainly due to the company's strengthening of management team building and putting new plants into use. The increase in R&D expenses rate was mainly due to investment in strengthening personnel and R&D activities to ensure leading product technical performance. The company has continuously strengthened the accumulation of processes such as chip design, wafer manufacturing, chip processing and package testing. It has made many breakthroughs in core technology, and has successively launched high-power semiconductor laser chips of different wavelengths and different application fields with higher wattage and higher performance. At the same time, the company relies on technology accumulation in the field of high-power semiconductor laser chips to build three material systems: GaAs (arsenic), InP (phosphating), and GaN (nitrider), establish two major process technology and manufacturing platforms for edge emission and surface emission, and extend the development of downstream products such as devices, modules, and direct semiconductor lasers; horizontally expanding the fields of VCSELs and optical communication laser chips. Currently, lidar chips are being verified and introduced by leading customers.
Orders in scientific research and special fields have been placed one after another to help accelerate future performance growth.
With effects such as thermal effects, photoelectric effects, and thermal coupling of high-power lasers, high-power lasers play an important role in scientific research and special fields, especially in the fields of high-end manufacturing, precision materials, guidance, radar, and optoelectronic warfare, which require higher laser performance. With China's continuous investment in scientific research and national funding, the company's orders in scientific research and special fields will be implemented one after another to help accelerate performance growth.
Investment advice:
We expect the company's revenue for 2023-2025 to be 648/931/1,246 million yuan respectively, and the net profit of the mother is 194/304/379 million yuan respectively. Corresponding to the current stock price PE is 65/41/33x respectively, covered for the first time, and given a “buy” rating.
Risk warning:
Risk of product development falling short of expectations, risk of loss of key technical talent, risk of macroeconomic and industry fluctuations, risk of increased market competition, etc.