Introduction to this report:
The company's performance for the third quarter of 2023 was slightly lower than expected. The company continued to focus on R&D, its main business developed steadily, introduced war investment funds to expand the company's R&D capital, and the company has sufficient momentum for future development.
Key points of investment:
Maintain an increase in holdings rating. We maintain the company's 2023-2025 EPS forecast at 0.55/0.65/0.84 yuan respectively. Considering the rise in the average valuation level of the optical industry and the fact that the company is the world's largest LBO and BBO crystal manufacturer, we raised the company's valuation level to 60x PE in 2024, raised the target price to 39.0 (+3.25) yuan, and increased the holding rating.
The performance was slightly lower than expected. The company announced the third quarter report on 2023 results. The company achieved revenue of 596 million yuan in the first three quarters, -1.67% year-on-year, and net profit of 164 million yuan, -12.47% year-on-year. Looking at a single quarter, 23Q3 achieved operating income of 207 million yuan, -2.52% year-on-year, and net profit of 53 million yuan, or -21.55% of the same period last year.
Continuously strengthen the main business, and new shareholders join to help develop. The company's products are mainly in three categories: crystal components, precision optical components, and laser devices. It is the only company in China that provides one-stop services from crystals to optics and laser devices. The company focuses on developing research and development guided by market demand. Some laser core component products have been replaced domestically, and the three main businesses are developing steadily. Yuanzhi Optoelectronics, a subsidiary of the company, plans to introduce Yuanzhi Spark as a new shareholder through capital increases and stock expansion, with the aim of enriching Yuancheng Photonics's capital, which is expected to help the company expand its ultra-precision optical components and other businesses. After this capital injection, Fujing Technology will hold 45.79% of the shares in Photonics until now, while Spark will hold 37.04% of the shares.
Catalysts: Continued expansion of market share; introduction of new customers.
Risk warning: New product development falls short of expectations; downstream demand recovery falls short of expectations.