Maintain an increase in holdings rating. Considering that the recovery in some downstream sectors fell short of expectations, we lowered the company's 2024-2025 EPS to 0.60 (-0.09) /0.82 (-0.05) yuan, and added 0.98 yuan to the 2026 EPS forecast. Referring to comparable company valuation levels, considering the company's growth in optical modules, semiconductor equipment, etc., we gave the company 55x PE in 2024, lowered the target price to 33.0 (-8.4) yuan, and maintained an increase in holdings rating.
The company's performance fell slightly short of our expectations, and the product line continued to expand. According to the company's 2023 annual report, the company achieved operating income of 340 million yuan, -1.29% year on year, net profit after deducting 36 million yuan, or -24.14% year on year; 23Q4 achieved operating income of 93 million yuan, +13.45% year on month, +17.11% month-on-month, net profit of 12 million yuan after deducting non-return mother net profit, +12.49% year over month, and +43.90% month-on-month. Performance declined throughout 2023 due to factors such as a phased slowdown in downstream demand and the company's continued increase in R&D. However, the 23Q4 net profit after deduction was positive year-on-month, and AI computing power construction gradually contributed to growth momentum.
Downstream expansion continues, further opening up room for the company's growth. In the traditional field of optical communication, the company has customers such as Lumentum and Finisar. In the field of fiber lasers, the company has established stable cooperative relationships with R customers, nLight, etc. In addition, the company is actively expanding fields such as AR, intelligent driving, and semiconductor equipment. The AR field provides precision optical components such as prisms and geometric optical waveguide components; the intelligent driving field provides coated optical fiber cables and lenses to lidar customers; and semiconductor equipment products are mainly used in precision optical systems.
catalysts. AI computing power infrastructure is being accelerated; new progress has been made in the semiconductor field.
Risk warning. R&D progress fell short of expectations; market competition intensified.