Incident: The company released its 2023 annual report: 1) 2023: revenue of 5,076 billion yuan, yoy +16.0%, net profit to mother of 60 million yuan, yoy +4.2%, net profit of 520 million yuan, yoy +2.8%, gross profit margin 27.8%, yoy+0.9pct, net profit margin of 12.2%, yoy-1.4pct. 2) 23Q4: Revenue of 1,527 billion yuan, yoy +30.0%, qoq -10.0%, net profit to mother of 162 million yuan, yoy +69.1%, qoq -37.6%, net profit of 157 million yuan, yoy +82.5%, qoq -38.3%, gross profit margin 29.7%, yoy+3.2pct, qoq+1.1pct, net profit margin 10.9%, yoy+2.7pct, qoq-4.7pct.
Filter upgrades are profitable, and microprism increases in the long term. In '23, the company's optical components revenue was 2.45 billion yuan, yoy +21.1%, mainly benefiting from the rapid release of the 23H2 new microprism, with a gross profit margin of 30.7% and yoy+4.5pct, mainly due to the high gross margin of microprisms and absorptive reflection composite filters. 1) Filters: Absorptive and reflective composite filters have been introduced to all mainstream terminals in China, and their market share has increased dramatically. They are expected to accelerate the release in 24 years and raise the company's filter ASP and profit level. 2) Microprism: New periscope cameras from major customers will sink from Pro Max to Pro models in '24, and the company's Microprism revenue & profit are expected to increase significantly. Subsequent Android devices equipped with Periscope increased penetration rate, and even equipped with Dual Periscope, which is expected to bring more growth to the company.
As the share of thin-film optical panels increases, semiconductor optics are expected to benefit from 3D camera upgrades. 1) Thin film optical panels: Revenue of 1.85 billion yuan, yoy +17.8%, gross profit margin of 25.5%, yoy+3.4pct. In the future, the share of camera covers for major North American customers is expected to continue to increase, and the superposition category is expected to continue to grow. 2) Semiconductor optics: Revenue of 110 million yuan, yoy -62.5%, gross profit margin of 35.3%, yoy-5.0pct, and various products such as narrow band filters for H customers in 24 years are expected to contribute to the increase and benefit from Android 3D camera upgrades in the long term.
HUD customer development is smooth, and AR layout is growing in the long term. Automotive electronics (AR+) revenue in 23 years was 290 million yuan, yoy +54.4%. The company's annual HUD shipments exceeded 200,000 units, and ARHUD had the highest market share in China. It won 10+ fixed-point and Jaguar Land Rover HUD projects such as Changan Mazda, Geely, Dongfeng Rantu, etc., and more. HUD overseas/domestic/joint venture customers have blossomed, and lidar/welcome lights/pixel headlights have built many growth points. In terms of AR, the company actively promotes research and development of reflective and diffractive optical waveguides, and lays out long-term growth.
Investment advice: Considering the continued volume of high-margin products such as Microprism, we raised our previous profit forecast. We expect the company's net profit to be 8.0/10.0/11.7 (corresponding to the previous value of 76/950 million yuan in 24-25 years), corresponding to the PE valuation 27/22/19 times, maintaining the “buy” rating.
Risk warning events: Smartphone sales fall short of expectations; mobile phone optical upgrades fall short of expectations; industry competition intensifies; risk that information used in research reports is not updated in a timely manner.