Incident: The company released its 2023 annual report, 1) 2023 revenue of 31.68 billion yuan, yoy -4.6%, net profit to mother of 1.10 billion yuan, yoy -54.3%, gross profit margin of 14.5%, yoy-5.4pct. Previously forecast net profit of 1.08 to 1.2 billion yuan, and actual performance was close to the lower limit of the forecast. 2) Business segment: optical parts/optoelectronic products/optical instruments achieved revenue of 95.6/216.0/5.3 billion yuan, yoy +0.9%/-7.4%/+30.5%, gross profit margin of 28.4%/5.5%/41.2%, yoy-5.0pct/-5.2pct/-0.8pct, respectively.
Demand for 23H2 phones is picking up, which is expected to benefit from optical upgrades & AI mobile phone development. Mobile phone product revenue in '23 was 20.93 billion yuan, YOY -10.1%. Benefiting from the recovery in terminal demand, 23H2 mobile phone lens and module shipments have rebounded, with annual shipments of YOY -1.8%/+9.8%, ranking first in the world. In terms of high-end technology, the company is expected to benefit from optical upgrades such as periscope and glass plastic hybrid lenses. Furthermore, the development of AI mobile phones is expected to increase the proportion of high-end models, thereby boosting the sales volume and ASP of the company's mobile phone products.
The in-vehicle business is growing steadily, and the layout of advanced autonomous driving is being deepened. Vehicle product revenue in '23 was 5.28 billion yuan, yoy +28.6%. 1) Lens: Shipment volume of 908.12 million units, yoy +15.1%, the global market share is stable and the gap with second place has been further widened, and the 17MP 2-in-1 front-view car lens research and development has been completed. 2) Module: Deepen cooperation with Mobileye, Horizon, Nvidia, and Qualcomm to become their advanced autonomous driving certification partner. In addition, it has been designated as an 8MP module by the first international car company, consolidating the leading position of the 8MP module in the world. 3) Continue to deepen the layout of lidar, HUD, and smart headlights.
XR is expected to usher in innovative development and smooth mass production of machine vision products. The launch of Vision Pro is expected to drive innovation and development in the XR industry. The company's XR business revenue in '23 was 1.87 billion yuan, yoy -9.3%. The company further deepened strategic cooperation with mainstream VR players around the world and continued to strengthen R&D and mass production capabilities of optical waveguides/optical machines and light engines in the AR field, which is expected to benefit the long-term growth of AR. In terms of robot vision, RGBD modules based on self-developed algorithms have been mass-produced and shipped to mainstream customers in the industry.
Investment advice: Considering that the gross margin of mobile phone module products is still under some pressure, we lowered our previous profit forecast. The company's net profit for 2024-26 is estimated to be 15.2/19.2/2.33 billion yuan (corresponding to the previous value of 19.5/2.96 billion yuan in 2024-25), corresponding valuation 29/23/19 times, maintaining a “buy” rating.
Risk warning events: The development of intelligent driving falls short of expectations, the risk that pressure from car companies to cut prices is transmitted, smartphone demand falls short of expectations, and the risk that the information used in the research report is not updated in a timely manner.