Description of the event

The company recently released the 2023 annual report and the report for the first quarter of 2024. In 2023, the company achieved revenue of 220 million yuan/ +11.0%, net profit of 0.42 million yuan/ +8.05%, net profit of 28 million yuan/ -23.97%; of these, Q4 achieved revenue of 66 million yuan/ +20.69%, net profit of 0.09 million yuan/ +23.32%; 24Q1 achieved revenue of 49 million yuan/ +3.10%, net profit to mother of 0.07 million yuan/ -43.59%.

Incident reviews

Overall revenue grew steadily in '23, and the growth rate of net profit to mother improved year-on-year. In 2023, while maintaining product market share, the company actively expanded into higher-end application fields such as new energy power batteries, aerospace, and photovoltaics. Overall revenue performance grew steadily, various businesses continued to develop, the laser processing and control system business remained stable, the galvanometer business entered the batch sales stage, and the laser precision resistance control equipment business grew significantly. On a quarterly basis, Q1-Q4 revenue was 0.48/0.61/0.45/0.66 billion yuan, respectively, -5.44%/+11.40%/+18.51%/+20.69% year-on-year; net profit to mother was 0.12/0.13/0.07/0.09 billion yuan, respectively, +13.63%/-12.48%/+33.13%/+23.32% year-on-year, respectively. The company's revenue growth rate in a single quarter improved quarter by quarter. The growth rate of net profit to mother improved year-on-year in the second half of the year. The decline in the growth rate of net profit after deducting non-return to mother was mainly affected by the increase in expenses. Due to the increase in expenses brought about by increased marketing efforts and R&D investment over the past 23 years, it was compounded by the comprehensive impact of share payment expenses. The company's revenue remained flat during 24Q1, and the performance growth rate declined, mainly due to increased remuneration due to an increase in the number of personnel, an increase in share payment expenses, and a decrease in government subsidies.

Revenue from mid-range and high-end galvanometer control systems increased, and high-precision galvanometer and resistance adjustment equipment contributed incrementally. By product, in terms of software, the company's main control system maintained steady development, with laser processing control systems accounting for 70.13% of revenue. The increase was mainly due to the revenue achieved by middle and high-end control systems of 94.4577 million yuan/ +8.84%. The servo control system was affected by factors such as market competition and customer verification, achieving revenue of 1.5995 million yuan/ +52.17%. The company's servo control system is expected to increase significantly in 2024, while the standard functional galvanometer control system achieved revenue of 55.5519 million yuan/ -4.55%, mainly due to the impact of the overall environment and increased competition in the market. In terms of hardware, integrated hardware for laser systems accounted for 18.29%, compared with +3.05pcts. The company continued to develop key technologies for high-precision galvanometer motors and galvanometer products, and product production capacity, performance and production yield were gradually improved. The company's galvanometer matching control system has entered the field of new energy vehicles and 3C electronics. In 2023, the company's galvanometer products entered the mass production and marketing stage, and high-precision galvanometer achieved revenue of 16.0989 million yuan/ +42.46%, achieving sales volume of 5,834 units/ +102.22%; laser precision processing equipment Revenue accounted for 11.57%, compared with +1.26pcts. Among them, the company's self-developed laser precision resistance control equipment achieved revenue of 13.809 million yuan/ +56.54%. The product achieved great technological progress, and the product was recognized by more customers.

Various cost increases constrained performance growth, and gross margin rebounded in 24Q1. In 2023, the company achieved a gross margin of 59.10% /-1.32pcts, mainly affected by the gross profit margin of 20.56% /-0.04pct of integrated hardware with an increased share of laser systems, 71.36% /+0.60pct, and a gross profit margin of 45.73% /+1.12pcts for laser precision processing equipment. 24Q1 The company's overall gross profit margin was 58.89%, +0.6pct year over year, and +0.2pct month-on-month recovery. In 2023, the company's rate for the period was 48.77% /+6.6pcts, mainly due to increases in various expenses such as increasing promotion expenses for market development, share payment expenses for equity incentives, and increased remuneration for R&D personnel. The 24Q1 company's rate for the period of 51.53% /+7.87pcts was mainly due to increased share payment expenses and R&D investment. The rate increase limited performance growth.

Investment advice

The galvanometer control system independently developed by the company is in a leading position in the domestic market segment. The company will continue to innovate products, accelerate the research and development of flexible laser precision intelligent manufacturing platforms and high-precision digital galvanometers, promote the mass application of high-precision laser resistance adjustment equipment in the fields of low resistance and high resistance, continuously improve the function and performance of servo control system products, and enhance product market competitiveness. At the same time, the company will further expand high-end application fields and accelerate the domestic substitution process in high-end fields. In addition, the company's 3D printed digital galvanometer is in the prototype delivery and early customer verification stage in 2023, and will also be a key promotion area for 24 years.

The company is expected to achieve revenue of 2.55/ 3.01/358 million yuan in 2024-2026, with net profit of 0.43/0.50/0.59 billion yuan, and corresponding EPS of 0.42/0.49/0.57 yuan, respectively. Based on the closing price of 18.38 yuan on April 24, PE will be 44.7X/38.2X/32.3X for 24-26, respectively, maintaining a “holdings increase-A” rating.

Risk warning

Market development in the field of laser processing and manufacturing falls short of expectations; new product development capabilities and market development risks; risk of not being able to achieve effective market development in high-end applications.