Company Overview

The company is one of the few suppliers of CNC systems and solutions specialized in the field of laser processing control in China. Its main products include laser processing control systems, laser system integrated hardware products, and laser precision processing equipment. According to the 2023 mid-year report data, the company's main revenue comes from laser processing control system products, accounting for about 70% of revenue, mainly from galvanometer control system products. Among them, the market development of servo control system products is gradually developing, accounting for about 1% of revenue. In terms of hardware, laser system integrated hardware accounts for about 18% of revenue, of which 8% comes from high-precision galvanometers; laser precision processing equipment accounts for about 12% of revenue, of which 7% comes from laser precision resistance adjustment equipment produced independently by the company. In terms of industry applications in key domestic markets, the company's products account for 36.78%, the 3C consumer electronics sector accounts for 21.86%, the new energy/battery/photovoltaics sector accounts for 21.30%, the PCB/semiconductor field accounts for 9.28%, and the aerospace sector accounts for 4.84%. In the field of laser galvanometer processing control systems, the company's total number of galvanometer control system products shipped accounts for about one-third of the total market volume, and the market share in the domestic market segment is still ranked first.

Description of the event

The company recently released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved revenue of 154 million yuan/ +7.33%, net profit of 33 million yuan/ +4.33%, net profit of net income of 333 million yuan/ +4.33%, net profit of 18 million yuan/ -39.76% after deducting non-return net profit of 118 million yuan/ -39.76%; of this, Q3 achieved revenue of 45 million yuan/ +18.51%, and net profit of 0.7 billion yuan/ +33.13%.

Incident reviews

Overall revenue grew steadily, and net profit growth was corrected in Q3. While maintaining product market share in the first three quarters, the company actively expanded into high-end application fields such as new energy power batteries and photovoltaics to make up for the impact of insufficient demand in the consumer 3C sector. In an environment where demand in the terminal market was insufficient, export demand was weak, and downward pressure remained, the company's revenue grew steadily in the first three quarters, and the performance growth rate was corrected.

On a quarterly basis, Q1-Q3 revenue was 0.48/0.61/045 million yuan, a year-on-year difference of -5.44%/+11.40%/+18.51%, respectively; net profit was 0.12/0.13/0.07 billion yuan, respectively, a year-on-year difference of +13.63%/-12.48%/+33.13%, respectively. In Q3, the growth rate of net profit of the mother's net profit improved significantly, mainly due to the increase in government subsidy revenue and income from wealth management products. Due to the increase in costs brought about by increased marketing efforts and R&D investment since this year, as well as the impact of about 7 million in share payment fees, the company's profit growth has slowed. However, after excluding share payment expenses, net profit after deducting non-return net profit fell by about 16% year on year. In terms of gross margin, the company achieved 60.11% in the first three quarters, +1.03pct over the previous quarter, mainly boosted by the increase in the share of middle and high-end control systems.

Revenue from high-end galvanometer control systems increased, and high-precision galvanometer and resistance adjustment equipment contributed an increase. By product, in terms of software, 2023H1 has achieved revenue of 46.076 million yuan/ +2.1%, and servo control system products have achieved revenue of 46.076 million yuan/ +2.1%, and servo control system products have been tested and tested at dozens of customers, achieving revenue of 1 million yuan/ +942%; in terms of hardware, in integrated hardware for laser systems, the company continues to carry out key technology research and development of galvanometer products, and product production capacity, performance and production yield have gradually improved. The Japan-related technology introduced by Suzhou Gentai has also gradually been introduced into production, and high-precision vibrators have achieved revenue 9.13 million yuan/ +63%; Among laser precision processing equipment, the company's self-developed laser precision resistance adjustment equipment achieved revenue of 7.39 million yuan/ +212.11%. It is mainly used in aerospace, electronic component production and other fields, and can be customized according to customer needs to meet the special needs of different applications.

Subsidiaries with increased capital promoted hardware product research and development, and products were gradually introduced into production. According to the company's strategic adjustments and the implementation of fund-raising projects, the company and Japan's Technohands cooperated to invest in the establishment of Suzhou Gentai and increased capital in the first half of the year. Its main business is to provide Suzhou Golden Orange with services related to the development and production of high-precision galvanometer motors. Among them, the subsidiary Suzhou Golden Orange accounted for 85% of the shares; Japan-related technology introduced by Suzhou Gentai was also gradually introduced into production in the first half of the year. FalconScan series products and high-power welding galvanometer products have been newly launched, and the relevant performance indicators have reached the same level as international products. At the same time, the company cooperates with universities to jointly develop and commercialize high-end five-axis galvanometers, which is expected to bring new business breakthroughs to the company. In addition, the company has also increased capital for its subsidiary Beijing Fengsu. Beijing Fengsu will continue to develop and sell laser precision resistance adjustment equipment to provide high-quality and high-precision processing equipment for aerospace, electronic component production and other industries. The company's self-produced laser precision resistance adjustment equipment can be customized according to customer needs, and all performance indicators have reached a high level and received unanimous recognition from customers.

Investment advice

The company's self-developed galvanometer control system is in a leading position in the domestic market segment. On the basis of consolidating current market share, in the future, the company will continue to introduce new products, increase R&D investment in new products such as servo control systems, flexible laser precision intelligent manufacturing platforms, flight control systems, high-precision digital galvanometers, and high-precision laser resistance modulation equipment to break through domestic and foreign technical barriers; on the other hand, it will continue to penetrate high-end application fields such as aerospace, semiconductors, new energy, photovoltaics, etc., to increase the market development capacity and market share of the company's products, and accelerate the domestic substitution process in high-end fields. In addition, the company's 3D printed galvanometer products are currently still being verified by customers and continuously optimized. The company is expected to achieve revenue of 235/3.08/409 million yuan in 2023-2025, a year-on-year increase of 18.7%/31.2%/32.8%; achieve net profit of 0.45/0.63/0.83 billion yuan, a year-on-year increase of 15.5%/40.3%/31.0%, corresponding to 2023-2025 EPS of 0.44/0.62/0.81 yuan, respectively. Based on the closing price of 30.11 yuan on November 3, PE for 23-25 is 68.5X/48.8X/ 37.3X, covered for the first time, was given an “Excess Holdings-A” rating.

Risk warning

The risk that business performance will be affected by developments in the downstream laser control system segment. At present, the company's control system products still account for a low share of sales in high-end applications. Therefore, the company's laser control system is not only affected by fluctuations in the development of the low-power laser microprocessing field, but there is also a risk that the sales share of high-end control systems in the product structure will decline due to insufficient development in the company's middle and high-end application fields.

New product market development risks. The company's laser servo control system and high-precision galvanometer products are all newly entered into the market. Their development and development require a certain market verification cycle and customer accumulation, and are also affected by the macroeconomic environment and the overall situation in the industry. If expected progress is not achieved in product development and customer development, etc., there is a risk that new products will not be able to effectively develop markets.

Market competition risk. Compared with international manufacturers such as German Scaps and Scanlab, the company still has a certain gap in detailed technology such as robot and 3D galvanometer linkage processing technology, large format splicing control technology, real-time beam fluctuation offset compensation technology, and laser cladding; currently, the company's share of control system sales in high-end applications is still at a low level. Therefore, the company may face the risk that it will not be able to catch up with foreign competitors in high-end application technology, or that it will not be able to achieve effective market development in the high-end application field.