Incident: The company released its 2023 annual report and 2024 quarterly report. The full year of 2023 achieved revenue of 582 million yuan, +2.35% year over year; net profit to mother was 39 million yuan, or -42.06% year over year. 24Q1 achieved revenue of 116 million yuan, +18.20% year-on-year, and net profit to mother of -0.07 billion yuan, or -251.57% year-on-year.

The performance was in line with expectations. On the revenue side, revenue growth slowed for the full year of '23, mainly due to the long acceptance cycle for some of the company's new products and customized equipment, and some orders have yet to confirm revenue. On the profit side, the company's profit declined seriously, mainly due to: 1) the decline in overall gross margin due to product restructuring; 2) the company continued to explore new markets while strengthening research and development of new products and technologies, leading to a sharp increase in sales and R&D expenses.

The gross margin increased month-on-month, and the expense ratio increased year-on-year during the period. 1) Gross profit margin: The company's gross margin in 2023 was 46.61%, -3.09pct year-on-year. Among them, 23Q4 gross margin was 45.95%, -4.18pct year over year, and +3.02pct month-on-month. 24Q1 gross margin was 49.30%, -2.05pct yoy, +3.35pct month-on-month. 2) Period expenses: The company's expenses rate for the 2023 period was 43.16%, +4.25 pct year on year. Among them, sales, management, R&D, and finance expenses were 17.30%, 9.82%, 17.82%, and -1.77%, respectively, +0.95, +0.68, +2.83, and -0.21pct, respectively.

We have made breakthroughs in many technology research and development, and we are optimistic about future development potential. 1) Semiconductors: In terms of microLED, laser mass transfer equipment received the first customer order in '22, and the new customer order was successfully implemented; on the SiC side, silicon carbide ingot laser slicing technology has completed process development, testing and verification, and has received batch orders from leading customers in '23; in terms of advanced packaging, many new devices developed by the company in '23 have now been ordered and shipped. 2) New energy: In terms of perovskite, the company launched the second-generation perovskite thin-film solar cell full stage equipment in '23, and obtained the first batch of GW line orders from leading customers and some new customer orders; in terms of lithium battery laser processing technology, orders for laser cell blue film removal equipment gradually increased in '23, and developed a variety of new products. 3) Lasers: In 2023, the company officially launched a series of fiber lasers, including full-fiber femtosecond lasers, QCW fiber lasers, MOPA fiber lasers, etc., which have great potential for growth.

Profit forecast: We expect net profit to be 0.47 billion yuan, 0.58, and 74 million yuan respectively in 2024-26, maintaining the “increase in holdings” rating.

Risk warning: Expansion into new fields falls short of expectations, downstream demand recovery falls short of expectations, industry competition intensifies, etc.