What happened: the company released its semi-annual report in 2023. In 2023, H1 realized revenue of 1.854 billion yuan, down 1.63% from the same period last year; realized net profit of 177 million yuan, down 27.72% from the same period last year; realized net profit of 111 million yuan, down 42.41% from the same period last year; from a quarterly point of view, Q2 of the company achieved revenue of 977 million yuan in 2023, an increase of 4.15% over the same period last year and 11.40% over the same period last year. The net profit of returning to the mother was 85 million yuan, down 35.57% from the same period last year and 8.77% from the previous year; the net profit from the non-return to the mother was 48 million yuan, down 57.05% from the same period last year and 23.35% from the previous year.

Cost is a drag on profits, micro-prism smooth mass production: 2023 H1, affected by the macro environment, industry cycle and other factors, the performance of the consumer electronics industry represented by smartphones is low, and the company's performance is lower than the same period last year.

From a product point of view: in 2023, the revenue of H1 company's optical imaging components / film optical panels / reflective materials / automotive electronics (AR+) / semiconductor optical business was 8.06x6xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The company's H1 gross profit margin in 2023 was 25.55%, an increase of 1.10pct over the same period last year; the net profit margin was 10.06%, down 3.63pct from the same period last year; the company's overall gross profit margin increased year-on-year, mainly because the gross profit margin of the company's imaging optical components / semiconductor optical / thin-film optical panel business increased year-on-year; the company's net profit margin decreased year-on-year, mainly due to: 1. During the period of the company, the cost increased compared with the same period last year. The company's fair value change income dropped sharply compared with the same period last year. In 2023, the H1 sales expense rate, management expense rate, R & D expense rate and financial expense rate were 1.59% 8.67%, 11.69% and 2.21%, respectively, and the changes over the same period were + 0.51/+1.28/+3.47/+1.20pcts. The rate of H1 R & D expenses has increased in 23 years, mainly due to the substantial increase in R & D expenses of the company in the first half of the year. The R & D expenses are mainly used for the micro-prism module project, which began mass production in June and is expected to contribute performance and profits to the company in the second half of the year.

Layout of on-board optoelectronics, construction of the second curve of development: with the global development of new energy vehicles has entered an irreversible fast lane, the company in the field of automotive electronics layout of AR-HUD/W-HUD, lidar windows, vehicle optical components and other products ushered in a great opportunity for vigorous development. As a new industrial sector of the company, AR+ business accounts for 7% of the company's main business income from 4%. Among them, the company's AR-HUD products continue to promote the market by means of leading technology and reduced manufacturing costs, and build an overall leading market pattern. In the first half of 2023, the company successfully won all the AR-HUD and W-HUD projects of Jaguar Land Rover's EMA platform, becoming the first domestic HUD tier1 supplier to enter an overseas head vehicle factory, achieving a breakthrough in overseas business for the first time, and also ushering in the technology exchange opportunities of many overseas mainframe factories. The domestic market in Changan Deep Blue S7 model to achieve AR-HUD all-series standard, newly entered Changan Mazda, Geely, Dongfeng and other mainframe factories, access to more than ten designated projects. The company has successfully constructed the market pattern of multi-point blooming among overseas, joint venture and domestic customers, and realized the great-leap-forward development of vehicle-mounted HUD business; the company has maintained the leading position in the lidar industry and established the absolute technological leadership of glass lidar window sheets in the field of vehicle optoelectronics, while building core components such as free surface mirrors. The company lays out the on-board optoelectronics and constructs the second curve of development. with the development of automobile intelligence, it is expected to grasp the key window period of the intelligent automobile industry opening to optical enterprises, so as to realize the further growth of automotive electronics business revenue.

The thin film optical panel business continues to develop, and the new optical components are progressing smoothly: according to the foresight Industrial Research Institute, the market scale growth rate of China's optical thin film industry in 2022-2027 is still higher than the global average, and the compound growth rate is about 10.5%. The market size of China's optical thin film industry is about 76.9 billion yuan. In the first half of 2023, the company's thin film optical panel business continued to make efforts, and the performance reached a new high. In the field of thin film optical panels, the company is deeply engaged in the business of major customers in North America, actively promoting the development of new categories, and constantly increasing market share.

The product specifications of the company's mobile camera cover cover the new model of the terminal, and get the opportunity to expand the flat side key project and successfully achieve the target, and the business structure is gradually optimized. The company actively develops the application opportunities of products in smart wear, smart home, drones, floor-sweeping robots, motion cameras and other fields, injecting new momentum into the lasting development of the business. In the field of optical components, the company continues to increase the research and development investment in the strategic project of micro optical prism module, rapidly enhance the organizational strength, keep up with the high standard requirements of end customers, and quickly complete the construction of digital production line under many difficulties and challenges. to achieve the industry's first process and mass production breakthrough, the company's advanced manufacturing to a new level. The company's miniature optical prism module project successfully launched mass production in the first half of the year, marking the company's entry into the ranks of module and solution providers in the traditional optical components business, and opened up a new development pattern. The company's infrared cutoff filter and its components products ensure the stable development of the business through process optimization, management improvement, cost reduction and other measures, and the SLR camera business continues to maintain a high market share, creating a good record of rising sales and profits.

Downgrade earnings forecast and maintain "buy" rating: the company has been engaged in the optical industry for 20 years, focusing on the optoelectronic fields of imaging, perception and display, focusing on information acquisition and information presentation. With optical core components / components, modules and customer solutions as the core, a rich product structure has been built. Thanks to the development of intelligent cars and the increase in shipments of periscope zoom cameras, the company's revenue is expected to continue to grow. Affected by the poor performance of the consumer electronics industry in the first half of the year, the company's H1 performance is under short-term pressure, and we downgrade our profit forecast. it is estimated that the company's net profit from 2023 to 2025 will be 556 million yuan, 670 million yuan and 848 million yuan respectively, and the EPS will be 0.40,0.48,0.61 yuan respectively, and the corresponding PE will be 27x, 22x and 17x respectively.

Risk hints: market competition risk, lower-than-expected downstream demand, technology development and iterative upgrade risk, intensified market competition