Incident: Maolai Optics released its semi-annual report for 2023. 2023H1 achieved revenue of 239 million yuan, up 15.63% year on year; net profit of 29 million yuan, up 9.60% year on year; net profit after deducting non-return net profit of 225 million yuan, down 4.28% year on year.

The semiconductor optics business is rapidly expanding: Maurai Optics' precision optical components and optical module products can be used in semiconductor equipment such as semiconductor quantity inspection equipment and lithography machines. 2023H1's semiconductor business revenue grew 39.50% year-on-year, faster than the company's overall revenue, accounting for 33.78% of revenue. Imports of optical semiconductor equipment from overseas are restricted, and the urgency of localizing lithography machines and measurement equipment is increasing; Maolai's optical semiconductor business is expected to continue to expand rapidly.

We are deeply involved in the field of micro-nano optics and have deployed a number of high-end technologies: compared with consumer-grade optical products, the accuracy requirements for industrial grade optical processing are higher. The company has mastered optical manufacturing processes such as polishing, edging, coating, molding, gluing, assembly, and testing; on this basis, the company continues to carry out research and development of a number of semiconductor measurement and lithography technologies, and is expected to involve more high-end optical component processing business in the future. Maolai Optics 2023H1 spent 33 million yuan on R&D, a significant increase over the previous year of 2022H1 of 225 million yuan.

The VR/AR business is expected to contribute new impetus to growth in the future: the company has prepared testing technology for comprehensive performance parameters of optical path devices, projection modules, and micro display modules used in AR/VR terminal products, and the scope of customers can cover the upstream, middle and downstream fields of the industrial chain. To strengthen the company's leading business in metaverse product testing, Maolai Optics is accelerating product maturity and exploring new application opportunities.

With the development of new customers and macroeconomic improvements, the company's VR/AR business is expected to resume growth in the future.

Investment suggestion: Taking into account the development status of the domestic semiconductor industry and the current R&D progress of the company's core technology, we expect the company's revenue for 2023-25 to be 560/658/802 million yuan, net profit of 0.82, 1.1, and 134 million yuan respectively. The corresponding PE is 137.96/101.72/84.17 times. For the first time, the “increase in holdings” rating is given.

Risk warning: The downward cycle in the semiconductor market is compounded by overseas supply risks, and demand for semiconductor optical components is slowing down; high-end product development progress falls short of expectations; industry competition is intensifying.