Incident: The company released its annual report for 2023. The company achieved revenue of 1,226 billion yuan, yoy +4.46%; net profit to mother was 107 million yuan, yoy +39.87%. The performance was slightly lower than market expectations.
Comment:
The laser business is growing rapidly, and the equipment business has declined. 1) Laser revenue of 665 million yuan, yoy +11.63%, thanks to the company's product development and business expansion in the field of power battery laser processing, from an increase in laser revenue related to power battery laser processing; 2) Laser/optical intelligent equipment revenue of 436 million yuan, yoy -8.11%, mainly due to weakening demand in the passive components industry and a decline in customer demand for new equipment; 3) Optical fiber device revenue of 22 million yuan, yoy -22.94%.
Product structure has been optimized, and profitability has been greatly improved. The gross profit margin of sales in 2023 was 41.11%, up 5.48% from '22. By business: 1) Lasers: gross profit margin of 39.16% in '23, up 9.63% from '22, mainly due to shrinking losses in the continuous light laser business and actively expanding lasers for new energy; 2) Laser/optical intelligent equipment: 43.20% gross profit margin in '23, up 1.49% from '22:3) Optical fiber devices: 21.85% gross margin in '23, down 5.43% from '22.
The cost rate remained stable during the period, and the management fee rate increased. The fee rate for the 2023 period was 28.91%, up 0.66% from '22. Among them: 1) the sales expense ratio was 7.86%, down 0.28% from '22; 2) the management expense ratio was 8.49%, up 1.20% from '22; 3) the R&D expense ratio was 12.72%, down 1.43% from '22; 4) the financial expense ratio was -0.15%, up 1.17% from '22.
Multiple services are working together, and module testing is expected to bring about an increase. 1) Lasers: Develop in the technical direction of “high power, high brightness, multiple wavelengths, and ultra-narrow pulse width” and continue to expand product categories; 2) New energy laser equipment: lithium battery business. The company continues to pay attention to the latest trends in the lithium battery industry, actively cooperate with customers to develop products needed for new materials and processes, and actively expand new lithium battery industry customers; photovoltaic business, continuous product iteration in the field of perovskite; 3) Testing equipment: In recent years, it is expected that it will continue to increase in various categories of intelligent equipment such as VCSEL module testing, MR glasses testing, and mobile phone camera testing. The number of customer cooperation projects brought growth to the company's business.
Profit forecast and valuation: Considering the slowdown in downstream production expansion in the lithium battery business, the 24-25 profit forecast was lowered. In addition, the 24-25 profit forecast was added. The 24-26 results are expected to be 1.67, 2.52, and 353 million, respectively (previously estimated 24-25 results were 230 million and 370 million), and the corresponding PE is 25, 17, and 12X, respectively. Considering: 1) The company's main business has maintained a steady scale, and the high gross margin testing business is expected to maintain rapid growth; 2) Lasers and laser precision processing equipment are comparable to the company's Rayco Laser and Delon Laser. According to Wind's unanimous forecast, the average PE value of comparable companies in 24-25 is 37 and 24X, and the company's PE level is lower than that of comparable companies. Therefore, the buy rating is maintained.
Risk warning: Risks such as declining laser business prosperity, intensifying industry competition, and falling short of expectations in the new module business.