Losses narrowed month-on-month, and profitability gradually recovered. In the first three quarters of 2023, the company achieved operating income of 7.09 billion yuan, down 10% year on year; net profit was 330 million yuan, down 261% year on year. The performance pressure in the first three quarters was mainly affected by macroeconomics and various aspects. The consumer electronics boom declined, and demand for high-definition wide-angle lenses declined. At the same time, the company's mobile phone optics and touch businesses were less resilient to risks, and operating performance was lost. Q3 Quarterly operating income was 2.89 billion yuan, down 5% year on year, up 29% month on month; net profit was 49 million yuan. Loss margin narrowed month on month, and net interest rate continued to improve month on month. At the same time, in order to consolidate its core competitiveness in the field of automotive optics and continue to expand its product line, the company's R&D investment continues to be high. As new automotive camera customer projects continue to increase, and R&D projects such as lidar core optical components, millimeter wave radar, automotive touch screens, and ARHUD continue to advance, the company's R&D expenses in the first three quarters were nearly 400 million yuan, an increase of 30% over the previous year, and the R&D cost rate was 5.6%.
Vehicle optical products and customer layout continue to deepen. The company continues to increase cooperation with overseas car company T, deepen strategic cooperation with internationally renowned advanced automotive assistance safety driving solutions companies such as Mobileye and Nvidia, and expand the market share of automotive lenses in well-known European and American automotive electronics manufacturers Aptiv, Valeo, and Magna. The company also attaches importance to cooperation with domestic premium automobile-assisted safe driving solution companies such as Horizon and Baidu, and has expanded the cooperation of in-vehicle cameras and video modules with well-known domestic terminal manufacturers such as NIO, BYD, and Geely. It has fully entered several leading domestic and foreign automobile brands and major global automotive tier 1 customers, and has strong customer resource barriers. High-pixel ADAS lenses and modules have extremely high technical barriers. The company's molded glass production capacity reaches 5 KK/month. Through the integrated customization of aspherical glass, lens and module, a stable customer base and high-quality manufacturing process have been achieved, promoting the continuous expansion of the automotive business.
Build overseas factories and create a global production capacity layout. The company announced in July that it plans to invest no more than 10.9 million US dollars to build a Mexican plant to better serve high-end customers in the US and help deliver the company's products to potential and existing customers in North America. Overall, the company's cooperation with major North American customers continues to deepen, and it is expected to become its number one supplier of automotive lenses, benefiting from the continued sales of major customer models and the camera pixel upgrade trend brought about by the upgrade of its autonomous driving platform.
We forecast the company's earnings per share for 23-25 to be -0.14/0.26/0.63 yuan (the original 23-24 forecast was 0.49/0.71 yuan, respectively, which mainly lowered the revenue and gross profit margin of each business and raised the R&D expense ratio). Based on comparable companies' 24-year PE valuation of 45 times PE, the corresponding target price was 11.58 yuan, maintaining the buying rating.
Risk warning
The penetration rate of autonomous driving falls short of expectations, optical lens shipments fall short of expectations, risk of declining gross margin, risk of continued weakening consumer electronics demand, and risk of loss of credit impairment.