Incident: The company released its 2023 annual report, achieving full-year revenue of 1,226 billion yuan, and net profit of 107 million yuan, net profit to mother of 107 million yuan, +39.87% year-on-year, after deducting non-net profit of 86 million yuan, +58.55% year-on-year, gross profit margin of 41.11%, and +5.48 pcts year-on-year.

The performance was in line with expectations, and profitability continued to improve: 2023Q4 achieved revenue of 322 million yuan in a single quarter, -12.31% /month-on-month -4.67%, realized net profit to mother of 0.23 million yuan, -8.04% /month-on-month -32.76%, net non-net profit of 0.18 million yuan, +63.32% /month-on-month -29.90%, gross profit margin of 45.76%, year-on-year +5.29pct/month-on-month +3.82pct. The company's 2023Q4 performance in a single quarter was under year-on-year pressure, and the impairment of the subsidiary Hailei's goodwill affected about 12 million yuan. The company's profitability continues to improve, and we judge that it is the impact of the improvement in the business structure. Looking ahead, we believe that businesses such as new energy lasers and optical inspection equipment are expected to bring more growth opportunities.

Diversified businesses have growth opportunities: new energy: lithium battery lasers are entering more customer supplier sequences, and domestic replacement+real-time welding monitoring systems help customers reduce costs and increase efficiency. Perovskite equipment has received orders for 100 megawatt mass production lines from leading customers in the industry. In the future, the gradual expansion of GW production lines in the industry is expected to lead to rapid order growth. Optical inspection: XR inspection has received multiple orders for imaging distortion detection/coating defect detection/laser marking, etc., and is actively developing more inspection and processing equipment. New orders have been received for camera inspection equipment, and future optical performance upgrades are expected to bring more demand. Passive components: In the context of the industry downturn, the company's integrated inductors are still receiving orders from leading customers. The capacitor test sorter launched in the first half of 2023 will be sent to customers for trial in the future. The company continues to optimize this product, and the overall recovery in the industry is also expected to increase demand for equipment.

Investment advice: The company's performance is in line with expectations, and the new layout of diversified businesses is expected to bring more room for growth in the future.

We expect the company's 2024-2026 net profit to be 200/3.32/376 million yuan, EPS 2.11/3.49/3.95 yuan/share, corresponding PE 19.92/12.01/10.61 times, maintaining the “increase” rating.

Risk warning: the industrialization of new products falls short of expectations; the risk that demand for new energy sources falls short of expectations; the risk of falling consumer electronics demand; and the risk of fluctuations in raw material supply and prices.