Introduction to this report:

The company's performance for the third quarter of 2023 is generally in line with expectations. The smart car and AR/VR business continues to develop, and investment in the Thai production base opens up room for long-term growth.

Key points of investment:

Maintain an increase in holdings rating. We maintain the company's 2023-2025 EPS forecast at 0.40/0.57/0.67 yuan, maintain the company's 2024 40x PE, maintain the target price of 22.8 yuan, and increase the rating.

The performance is generally in line with expectations, and research and development is constantly being strengthened. The company announced its report for the third quarter of 2023. The company achieved operating income of 1,254 billion yuan in the first three quarters, +14.34% year-on-year, and net profit of 49 million yuan, +13.22% year-on-year. Looking at a single quarter, 23Q3 achieved operating income of 453 million yuan, +18.78% year-on-year, and net profit of 210 million yuan, or -21.95% year-on-year. 23Q3 gross profit margin was 21.03%, y-4.11pcts, month-on-month -0.74pcts, net profit margin 2.16%, year-on-year -1.24pcts, and -4.29pcts month-on-month. The company continued to increase investment in R&D and continuously consolidate its technological and product advantages.

Smart car and AR/VR businesses continue to expand, and invest in Thai production sites to expand the global market.

In terms of automotive business, the company's in-vehicle camera products have basically covered the country's mainstream automakers and some first-tier international brands. The company's millimeter-wave radar and related products, AR-HUD related products, and in-vehicle projection products have received agreement from many NEV manufacturers; in terms of AR/VR, the company already has core technologies such as optical waveguides, Fresnel lenses, and pancake, and has reached cooperative relationships with friends and Xiaopai. At the same time, the company announced in October that it plans to invest no more than 10 million US dollars to build a production base in Thailand, which will further improve the company's overseas production capacity layout, international business development plan, and supply chain system, more efficiently approach and respond to the needs of overseas customers, and ensure the company's long-term steady development.

catalysts. AR/VR sales continue to rise; ADAS and Internet of Vehicles applications are popular.

Risk warning. The recovery in security demand fell short of expectations; R&D failed to follow up in a timely manner.