Incident Overview
On March 21, 2024, the company released its 2023 annual report. It achieved annual revenue of 5,076 billion yuan, an increase of 16.01% over the same period last year; net profit attributable to shareholders of listed companies was 600 million yuan, an increase of 4.15% over the same period last year; gross margin reached 27.81%, up 0.91 pct year on year, and net interest rate was 12.16%, down 1.44pct year on year.
Analytical judgment:
Revenue and profit were growing in '23. Leading optical manufacturers entered a new phase of development. The Q4 company achieved operating income of 1,527 billion yuan (+30.05% YoY, -9.96% YoY) and net profit to mother of 162 million yuan (+68.83% YoY, -37.69% YoY). Revenue and profit continued to grow quarter over quarter, and were affected by cost-side factors. Q4 gross margin was 29.7% (YoY +3.17pct, month-on-month +1.13pct), net profit margin 10.9% (YoY +2.72pct, -4.7pct month-on-month), and profitability continued to increase.
The company's revenue and profit all achieved positive year-on-year growth throughout '23. Since Q3, mass production of the company's new products has reached its peak, and Q3 and Q4 net profit contributions were 43% and 27% respectively; in terms of segment business, revenue in the optical components, thin film optical panels, automotive electronics (AR+), and reflective materials sectors all achieved positive growth. We believe that the company has achieved a transformation from a component - device module - solution supplier. In terms of basic optical business, it has further expanded new growth curves such as automotive electronics and metaverse optics.
The microprism and reflection filter business is progressing rapidly, and the penetration rate is expected to continue to increase. The optical components sector will achieve revenue of 2,446 billion yuan in 23, an increase of 21.11% over the previous year; the gross profit margin is 30.66%, an increase of 4.5 pct. The increase in revenue and profit in the optical device sector was mainly due to the rise in mass production of the microprism project in June 23. The company became the world's first mass production supplier of quadruple reflection prism modules, and the successful introduction of absorption reflection filters into mainstream domestic terminals, further increasing its market share. As the penetration rate of microprisms and reflection filters continues to increase in terminal penetration, we believe that the optical components sector is expected to create more growth for the company. The thin film optical panel segment achieved revenue of 1,849 billion yuan, an increase of 17.77% over the previous year; the gross profit margin was 25.48%, an increase of 3.37 pcts. Thanks to the company's continuous deepening cooperation with major North American customers, expanding terminal categories and shares, and improving lean management capabilities, the company's thin-film optical panel segment is expected to grow steadily.
Automotive electronics and metaverse optics create a new growth curve
The automotive electronics sector achieved revenue of 291 million yuan, an increase of 54.39% over the previous year; the gross profit margin was 11.72%, a decrease of 25.9pct. The company grasped the wave of automobile intelligence and accelerated HUD business expansion. In 23 years, HUD shipments exceeded 200,000 units, with AR-HUD ranking first in the domestic market share. In terms of projects, the company has entered the supply chain of mainstream overseas vehicle brands and obtained Jaguar Land Rover's HUD project; it has entered more than 10 new targeted projects including Geely, Dongfeng Rantu, and Changan Mazda. In terms of metaverse optics, along with the launch of Apple's first MR Vision Pro, the industry model accelerated maturity. The company already has a retractable, diffractive, reflective, and pancake full technical path layout in this optical circuit.
Investment advice
As a leading manufacturer of optics, the company's microprism and reflection filter projects drive mid-term growth, and automotive electronics and metaverse optics create room for long-term growth.
Based on factors such as the degree of recovery in downstream demand and improved profit margins, we expect revenue for 2024-2025 to be adjusted from $6.804/7.844 billion to $64.59/7.516 billion, or $8.362 billion in 2026; net profit due to mother from 2024-2025 to $786/988 million yuan, and $1,088 million in 2026; corresponding EPS of $0.57/0.78, March 2024 The closing price on the 25th was 14.07 yuan, corresponding to PE 25/20/18 times, maintaining the company's “gain” rating.
Risk warning
Consumer electronics recovery falls short of expectations, sales of new products fall short of expectations, and technological developments fall short of expectations