Incident: Connett released the 2023 performance report: In '23, the company achieved operating income of 1,760 million yuan/year on year, achieving net profit of 327 million yuan/year on year +31.56%; 23H2 revenue of 928 million yuan/year on year +24.36%, net profit to mother 168 million yuan/year on year +42.63%, achieving gross profit of 7.4% /+2.95pct.
Overall, as global economic activity returned to normal and demand for lenses grew steadily, the company achieved sales of 159 million lenses in '23, an increase of 4.89% over the previous year, and the output of the three production bases reached 181,000 pieces, an increase of 9.3% over the previous year; in addition, the product structure was further optimized, and high-refractive products contributed to a faster growth rate; customized lenses+ end-to-end business expansion had remarkable results.
By product: 1) The company's standardized lenses achieved revenue of 1,404 billion yuan/year over year, with a gross profit margin of 31.7% /+2.3 pct. We expect high gross margins of 1.74 and 1.67 high refractive products to drive an increase in overall gross margin; 2) Demand for adult progressive films and other functional products grew steadily, and customized lenses achieved revenue of 354 million/YoY +16.67%, gross profit margin of 57.6% /+2.8pct.
By region: The biggest increase in the Chinese market contribution: Mainland China achieved revenue of 575 million yuan/year on year +28.67%; revenue from the Americas 406 million yuan/year on year +3.60%; Asia (excluding mainland China) revenue 379 million yuan/year on year +6.26%; European revenue 300 million yuan/year on year +3.70%; Oceania revenue of 76 million yuan/year on year +20.10%; Africa achieved revenue of 0.24 million yuan/year on year.
Looking at financial indicators: 1) Profitability: 23-year gross profit margin of 37.4% /+2.95pct, mainly due to RMB depreciation, product upgrades, large-scale effects, etc., net interest rate 18.58% /+2.66pct, sales rate 5.86% /+1.38pct, management rate 9.94% /+0.02pct, financial rate 0.78% /-0.87pct, mainly due to the reduction in interest-bearing liabilities after listing and financing; 2) In terms of operating indicators, inventory turnover days were 166.64 days, close to accounts receivable; Cash turnover day The level remained low for 55.55 days.
Investment advice: As a leading manufacturer of lenses in China, Conet has significant advantages in production, R&D, and sales. It is expected to increase its market share while growing steadily in the global lens industry. Furthermore, the barriers to customized lenses+ end-to-end services are high, which is expected to optimize the company's profit level. We expect the company to achieve revenue of 20.0, 22.6, and 2.57 billion yuan in 24-26, with net profit of 4.11, 4.77, and 550 million yuan respectively, corresponding to the closing price of March 28, PE of 8.13, 7.00, and 6.08 times, respectively.
Risk warning: customized business falls short of expectations, industry competition intensifies, exchange rate risk