Description of the event

The company released its 2023 annual report. In 2023, the company achieved revenue of 3.68 billion yuan, +15.40% year on year; net profit to mother of 217 million yuan, +431.95% year-on-year; net profit after deducting non-return to mother of 166 million yuan, or 1825.92% year-on-year.

Based on this calculation, 23Q4 revenue was 1,097 billion yuan, +26.38% year over year; net profit to mother was 0.45 yuan, +471.35% year over year; net profit after deducting non-return to mother was 0.04 billion yuan, which was a year-on-year correction.

Incident comments

High power+penetration of emerging scenarios+overseas expansion drive rapid sales and revenue growth. In 2023, the company sold 159,000 units throughout the year, with a year-on-year increase of 16.39%, including nearly 6,000 units above 10,000 watts; on the revenue side, continuous fiber/pulsed fiber laser revenue was +20.16%/3.01%, respectively, mainly due to: 1) The application penetration of high-power lasers in the cutting field increased rapidly. At the same time, the company launched a variety of new products to continuously explore the market, and its market share in the laser cutting field continued to increase; 2) Emerging application scenarios continued to emerge. The penetration rate of lasers in the automotive, home appliances, machinery, consumer electronics and other industries continues to increase, and emerging domestic market segments such as high-end laser welding, laser cleaning, laser lighting, laser medical care, and handheld laser tools are developing rapidly; 3) International business is showing a rapid growth trend.

Product structure optimization combined with cost reduction and efficiency continued to advance, and the company's profitability was significantly restored. The company's gross profit margin in '23 was 26.00%, +7.94 pct. It is expected to mainly benefit from product structure optimization (increased share of high-power and customized products) and implementation of cost reduction and efficiency measures. On the cost side, the company's sales expense ratio was 6.81%, +2.49pct year on year. The main reason was that the company increased its market development efforts and increased overseas sales outlets, after-sales maintenance, employee remuneration and travel expenses, thus driving the period cost ratio +1.87pct year over year. On the profit side, the company's net interest rate for 23 was 6.12%, still +4.31pct year over year. In addition, the company's non-recurring profit and loss increased net profit by 52 million yuan in '23 (affecting 32 million yuan in '22), mainly due to an increase in government subsidies.

High-power iteration, expansion of new application fields, and long-term growth of the industry are driven by overseas demand, and leaders are expected to continue to benefit. The export boom in laser equipment and the acceleration of high-power penetration are expected to drive the continued release of demand for laser racetracks. Total exports of laser cutting equipment in 2023 were US$1.95 billion, +17% over the same period last year. The cost performance ratio of the company's products is remarkable compared to foreign investment. It is expected to continue to expand as downstream machine manufacturers go overseas and continue to benefit from the export boom of laser equipment. At present, the company has 13 overseas sales and service outlets, forming a global integrated service pattern, which is expected to drive the continuous growth of the company's performance.

Maintain a “buy” rating. We are optimistic that the company's profitability will continue to improve, and we expect high power and overseas market development to bring about flexible performance. Net profit of 3.4, 4.4, and 580 million yuan is expected to be achieved in 2024-2026, corresponding PE is 33x, 25x, and 19x, respectively.

Risk warning

1. The risk of manufacturing recovery falling short of expectations;

2. The risk of increased market competition;

3. The risk that the cost reduction of the product falls short of expectations.