Incident: On August 29, the company released its 23 annual report. 23H1 achieved revenue of 206 million yuan, -14.8% year-on-year; net profit of 0.04 million yuan, -85.2% year-on-year; net profit after deducting non-net profit -01 million yuan, -107.1% year-on-year.

Short-term performance is under pressure. By product, 23H1 precision laser processing equipment and lasers (foreign sales) revenue was 139 million yuan and 119 million yuan respectively, compared to -22.97% and -8.17%. Among them, the year-on-year decline in revenue from precision laser processing equipment was mainly due to a decline in demand for optical filter glass wafer processing equipment business terminals, which was superimposed on the contraction of laser processing equipment strategies; the year-on-year decline in lasers was mainly due to competitive companies reducing sales prices in the market. On a quarterly basis, 23Q2 achieved revenue of 108 million yuan, +2.75% year on year, +10.83% month on month; net profit to parent - 0.1 million yuan, YoY - 174.24%, -122.25% month on month; net profit after deducting non-net profit - 04 million yuan, -21.20% year on year, -265.19% month on month.

Gross margin declined year over year, and R&D investment continued to increase. 1) Gross profit margin: 23H1 gross margin was 49.60%, year on year -0.03 pct; of these, 23Q2 gross margin was 48.02%, year on year -3.34 pct, +0.16 pct month on month.

2) R&D cost rate: The company insists on independent innovation and continues to increase R&D investment in new products and technologies. 23H1 R&D expenses were +32.71% year-on-year, and R&D cost rate was 22.99%, +8.23pct year on year.

A number of breakthroughs have been made in technology research and development, and we are optimistic about future development potential. 1) Semiconductors: On the microLED side, a huge number of laser transfer equipment received its first customer order in '22, and now the new customer order has been successfully placed; on the SiC side, the silicon carbide crystal ingot laser slicing technology has completed process development, testing and verification, and has received batch orders from leading customers in '23; 2) New energy: On the perovskite side, the company's laser processing equipment for perovskite thin-film solar cells (100 megawatts) has had new customers and new orders in '23; in terms of the laser cell blue film removal process, the self-developed laser cell blue removal film equipment has passed customer testing and received verification and verification. The customer's first order. 3) Lasers: In 2023, the company officially launched a series of fiber lasers, including all-fiber femtosecond lasers, QCW fiber lasers, MOPA fiber lasers, etc., which have great potential for growth.

Profit forecast: Based on the slowdown in demand recovery in the industrial laser sector, net profit for 23-25 was lowered to 0.70/1.27/189 million yuan (previous value was 111/1.72/260 million yuan) to maintain the “buy” rating.

Risk warning: Expansion into new fields falls short of expectations, downstream demand recovery falls short of expectations, industry competition intensifies, etc.