Incident: The company released its 23 annual report, with revenue of 1,735 billion yuan +9.01%, net profit due to mother of 41 million yuan (loss of 152 million yuan in the same period of the previous year), net profit of 6.69 million yuan (loss of 191 million yuan in the same period of the previous year), gross profit margin of 20.26% year-on-year +14.80pcts, and a net profit margin of 2.33% yoy +11.92pcts. Based on the company's recent situation, our review is as follows:

The 23-year results were in line with expectations, bucked the trend and turned a loss into a profit, and profitability continued to improve. The company's 23Q4 revenue in a single quarter was 514 million yuan YoY +19.25% -2.05%, net profit to mother of 13.44 million yuan (loss of 0.42 million yuan in the same period last year), net profit of 8.44 million yuan (loss of 51 million yuan during the same period), gross profit margin 24.15% yoy +14.31pcts month-on-month +2.70pcts, net profit margin 3.17% yoy +14.19pcts month-on-month +3.61 pcts, further improving profitability. The company's revenue and net profit grew steadily in 23 years, mainly due to: 1) the large increase in high-margin 3D glass cover production and sales volume led to product structure optimization; 2) the new management continued to optimize costs and improve efficiency through the introduction of automation, process optimization, and supply chain integration. Furthermore, according to the annual report, in '23, the company acquired Anhui Xinguang into the new energy sector; expanded the Enshi Xinhao and Chuzhou Xinhao parks to steadily expand 3D glass and automotive glass production capacity and open up room for business growth; Lihao Optoelectronics built a fully automated glass back cover production line with comprehensive intelligent intelligent manufacturing management. Its excellent pass-through rate was highly praised by major customers, which is expected to lay a solid foundation for future cooperation with major customers.

By business and product structure, the company's glass cover product business revenue was 1,656 billion yuan +4.07%, accounting for 95.47%, with a gross profit margin of 20.73% yoy +15.27pcts, of which revenue applied to mobile phones and computer products was +17.22% yoy, 21.41% yoy +15.05pcts, headphone and wearable product revenue of 54 million yoy +19.33%, gross margin of consumer electronics products rebounded sharply, thanks to The company's own efficiency improvement and product structure optimization; revenue from automotive smart cockpit products was 0.04 billion +2.75% year over year, gross profit margin was 10.62% year over year - 12.34 pcts, and automobiles are still in their infancy; revenue from other terminals was 119 million yuan -8.17% year over year, and gross profit margin of 18.64% yoy -4.64pcts. The company's PV household storage products account for 4.53% of its revenue. In '23, the company sold 1,384 sets of photovoltaic equipment and components, and had an inventory of 8,286 sets by the end of the year. According to our tracking, the company's current demand for overseas orders is still good, and it is expected to usher in bulk shipments in Q2.

Looking ahead to 24 years, the company's Android 3D production capacity will be expanded and put into operation, household storage will gradually expand, and the A customer and automotive electronics business will continue to develop, ushering in a period of rapid growth. 1) Android side: Vigorously expand Enshi's 3D glass production capacity to help the main business regain growth in scale and profit. The company's high-end production capacity of Enshi Xinhao 3D Glass is expected to be completed and put into operation at the end of 24Q2. As the company continues to introduce flagship models and microcrystalline glass project orders from high-end Android customers, it is expected to greatly increase the company's current market share in 3D glass covers and help the main business return to rapid growth; 2) Customer side: New product NPI is progressing steadily, and cooperation is expected to land.

The company's 23Q2 capital was increased by 200 million yuan to its subsidiary, Nantong Lihao, to further assist it in NPI prototyping and development of new products for customer A. Currently, cooperation between the company and customer A is progressing steadily; 3) Automotive electronics: expanding the production capacity of large and medium-sized screen glass in Chuzhou to seek a new automotive electronics circuit. The company established Chuzhou Xinhao in 23Q4 and increased its capital by 80 million yuan, which is expected to be mainly used to build new production capacity for medium and large screen glass for vehicles. The company will actively develop head panel manufacturers and automakers. In the future, as production capacity is completed and put into operation, it is expected to bring new growth momentum to the company; 4) Overseas account storage: 24 years will usher in a phase of volumetric growth. Xinguang Energy, a subsidiary of 23H2, is vigorously expanding the household storage market overseas, has completed the launch of its own brand, and is steadily expanding its production capacity. Prices for upstream parts in the industry were greatly adjusted in '23. The company went overseas with its own brand and overall solutions. It still has strong market competitiveness, and the scale is expected to increase dramatically.

Maintain a “Strong Investment” investment rating. The upward trend in the company's Android business has been clear in 24 years. Together with Likai, we have continued to develop the A customer business. Empowered by Lixun's system automation, the company's growth logic for subsequent categories and customer expansion is clear, and it is expected to enter the first tier of the industry, and the long-term share increase flexibility is considerable. In addition, the company acquired and increased capital for Xinguang Technology to enter the new smart energy circuit, and the automobile business layout has also begun, which is expected to open up the company's long-term incremental space. Considering the high initial expenses of the company's account storage layout, and the future growth and continuous investment of Android, A customers, automobiles, and household storage, we recently forecast the company's 24-26 revenue of 28.6/43.4/5.20 billion yuan, net profit to mother of 1.50/2.80/400 million yuan, corresponding EPS of 1.25/2.33/3.34 yuan, and the corresponding PE is 34.8/18.7/13.0 times. Maintain a “Highly Recommended” investment rating considering the company's current size, core competitiveness, and potential future long-term development space.

Risk warning: Downstream demand recovery falls short of expectations; industry competition increases risk; customer and new business development progress falls short of expectations; risk of product technology upgrades; risk of inventory depreciation.