Incidents:

On October 31, 2023, the company released its report for the third quarter of 2023:

(1) In the single quarter of 2023, the company achieved revenue of 810 million yuan (+4.91%, -6.90% month-on-month), net profit of 104 million yuan (+17.59%, month-on-month), net profit of 99 million yuan (+24.35%, -6.47% month-on-month), gross profit margin of 20.10% (+2.02 pct, +1.00pct month-on-month), net profit margin of 16.00% (y-0.75pct, month-on-month, -11.4pct).

(2) 2023Q1-Q3 achieved revenue of 2,469 million yuan (-17.06% yoy), net profit of 319 million yuan (+19.24% yoy), net profit of 286 million yuan (+17.90% yoy), gross margin of 18.74% (+5.30pct), and net interest rate of 15.82% (yy +4.42pct).

Comment:

The laser industry is developing steadily, and the product matrix is constantly being enriched. The company has full orders for projects such as pump sources, lasers, and laser power supplies. Production capacity is at full capacity, and production capacity is being expanded in an orderly manner according to the plan. In terms of complete equipment, the second-generation laser anti-drone has completed development and passed inspection; in terms of devices, the company has launched and mass-produced laser devices with higher photoelectric efficiency, higher brightness, and lighter weight; in terms of product marketization, the company has upgraded and optimized the developed equipment and promoted the production and styling of the Lightblade-I and Lightblade II series laser anti-drone products, and the company's product matrix continues to be enriched.

Adhering to the “1+N” series superconducting project, the development of superconducting products is progressing smoothly. In the superconductivity industry sector, the company and Lianchuang Superconductivity and Chinalco Dongqing Co., Ltd. jointly hosted the commissioning ceremony of the world's first high-temperature superconducting induction heating device. The project is progressing smoothly. As of 23H1, the company's orders have exceeded 60 units, and marketing has gone smoothly. The company continues to deepen technological research and development, pioneering the application of high-temperature superconducting magnet technology to new photovoltaic-grade (N-type batteries) and semiconductor-grade magnetron monocrystalline growth furnaces. It uses high-temperature superconducting materials to make large-diameter conductive magnets, does not consume liquid nitrogen, has low refrigeration costs, and can meet the magnetic field strength required for the growth of large-sized, high-quality monocrystalline silicon. It can effectively inhibit melt convection and fluctuations in melt surface temperature, reduce oxygen concentration in the middle of silicon single crystals, improve radial uniformity of impurities, and improve the quality of large-size silicon monocrystals. It is estimated that 2024 Q1 can be studied A prototype of the principle of producing a new photovoltaic grade (N-type battery).

The commercial use of controllable nuclear fusion is expected to increase demand for superconducting magnets. In August 2023, Wu Rui, the actual controller of Lianchuang Optoelectronics, led a team to China Nuclear Fusion (Chengdu) Design and Research Institute Co., Ltd. to conduct in-depth discussions on fusion energy research cooperation, which is conducive to further promoting fusion energy research, helping the country's controllable nuclear fusion industry accelerate development, commercialize safe, controllable, and resource-rich nuclear fusion technology as soon as possible, and contribute to the national economy and people's livelihood with safe and sustainable clean energy. With the advent of the rapid development cycle of controllable nuclear fusion, the company's high-temperature superconducting industry construction will also gradually be marketed. In particular, superconducting magnets, as a key component of tokamak devices, account for nearly 50% of the cost of tokamak devices. The market space is large. In the future, controllable nuclear fusion will be commercialized, which will generate more demand for superconducting magnets.

Maintaining the “buy” rating: We maintain the company's forecast of achieving net profit of 443/590 million yuan in 2023-2024, and added the forecast of net profit of 688 million yuan for 25 years, corresponding to the current PE valuation of 36X/27X/23X. With the restructuring of the company's main business, intelligent controller products, high-end optocoupler products have entered the important supply chain system of leading customers. Businesses such as lasers and superconductors have built a new growth curve for the company and maintained a “buy” rating.

Risk warning: Downstream demand falls short of expected risk, new product development progress falls short of expected risk, and customer introduction progress falls short of expected risk.