Incident: On the evening of August 24, the company disclosed its 2023 semi-annual report. According to the company's semi-annual report, 2023H1 achieved revenue of 239 million yuan, an increase of 15.63%; realized net profit of 29 million yuan, an increase of 9.6%; net profit after deducting non-net profit of 225 million yuan, a decrease of 4.28%.

Revenue and profit have increased steadily, and semiconductor optics have advanced by leaps and bounds. (1) Profitability: The company's 23H1 gross sales margin was 53.19% (same increase 2.49 pct), and net sales interest rate was 11.96% (same decrease 0.66 pct). Net interest rates have declined slightly mainly due to the company's continued increase in R&D investment and global layout. The 23Q2 alone achieved revenue of 114 million yuan (same increase of 20.24%) and net profit of 115 million yuan (same increase of 19.70%). (2) Segment business: semiconductor revenue of 80,000 million (33.78%, same increase of 39.5%); life science revenue of 77 million (32.35%, same increase of about 3.4%); biometric revenue of 225 million (10.36%, same increase of 42.0%). The company's semiconductor optical properties are becoming more and more prominent, and the semiconductor business has surpassed biomedicine to become the company's fastest growing and largest business. In other major downstream areas of the company, with the exception of the AR/VR inspection business, which was affected by macroeconomic fluctuations and insufficient industry technology drive, and customer orders fell short of expectations, most of the other businesses achieved year-on-year growth. (3) Asset situation: As of 23H1, the company's accounts receivable were about 100 million yuan and inventory was 141 million yuan, a significant increase from the end of 2022. It is expected to be converted into revenue in the second half of the year to achieve further results.

It is planned to establish a wholly-owned subsidiary in the UK and continue to strengthen its overseas presence. The company has maintained long-term partnerships with many overseas semiconductor inspection giants, including Camtek, Corning Group, and KLA (Kelei). The company is actively expanding overseas, with a production base in Thailand and a R&D center in the US. In May 2023, the company announced that it plans to increase the capital of its wholly-owned subsidiary Hong Kong Maolai by 27 million US dollars, and plans to rely on Hong Kong's geographical advantages to effectively strengthen international cooperation and overseas business development, increase capital by 15 million US dollars to Maulai, Thailand, and plan to invest 12 million US dollars to establish a wholly-owned subsidiary in the UK.

Semiconductor optics continues to improve to help localize lithography. The company's “optical device processing and coating technology for lithography systems” has completed design and entered the small-batch trial production stage, and is widely used in the manufacture of optical systems such as lithography machine lighting and exposure; “Large aperture wafer profile interference measurement technology” has entered the industrialization promotion stage, and the measurement results can provide direction guidance for lithography. The company is one of the few optical companies in China that has the ability to support the localization of lithography machines. Continuously advancing the R&D process, it is expected to provide customers with stable and reliable core optical devices and help domestic lithography machine production be autonomous and controllable.

Investment suggestions: Considering the disclosure in the company's semi-annual report, the AR/VR inspection business was affected by macroeconomic fluctuations and insufficient industry technology drive, and customer orders fell short of expectations. We adjusted the company's revenue forecast for 2023-2025 to 542/667/829 million yuan, adjusted the company's net profit forecast to 0.73/1.04/135 million yuan, and PE corresponding to the market value on August 25 was 123.95/86.34/66.69 times, respectively, maintaining the “buy” rating.

Risk warning: The company's R&D progress falls short of expectations, downstream demand falls short of expectations, and the risk of overseas trade friction.