2023 and 1Q24 results are in line with our expectations

The company announced its 2023 results: revenue for 2023 increased 3% year on year to 854 million yuan, net profit to mother fell 16% year on year to 235 million yuan, net profit after deducting non-return to mother fell 25% year on year to 162 million yuan, and net profit performance to mother basically met our expectations. Looking back at 2023, we believe that due to inventory adjustments from downstream customers in the barcode scanning lens business, the company's optical component product revenue fell 7% year on year to 420 million yuan, while optical component gross margin fell 6.0 percentage points to 35.3% year on year, which briefly dragged down the company's net profit performance; however, the company's overall business sector grew steadily, platform construction progressed steadily, and the long-term strategy was clear: 1) The high-end optical microscope brand NEXCOPE series product revenue increased from 4 million yuan in 2018 to 2023 Nearly 140 million yuan a year, with a compound annual growth rate of over 100%; 2) The automotive business contributed new growth momentum. In 2023, the company's automotive and lidar business achieved sales revenue of more than 90 million yuan (a year-on-year increase of more than 50%), forming good cooperation with well-known domestic and foreign lidar manufacturers; 3) The amount of medical optics released is obvious, and endoscopic lenses and optical components developed and produced by it have been shipped in batches, while actively developing complete surgical microscope machines.

The company also announced 1Q24 results: 1Q24's revenue increased 15% year on year to 216 million yuan, net profit after year fell 4% year on year to 46 million yuan, and net profit after deducted from non-return mother increased 27% year on year to 40 million yuan. We believe that the correction in revenue and deducted non-return results reflects a recovery in demand after nearly 2 years of inventory adjustments from barcode scanning customers, and the company's performance inflection point is initially showing. We recommend investors pay close attention to the progress of new barcode scanning modules, lidar optics and medical optics products in 2024.

Development trends

Medical optics and lidar go hand in hand to actively seize industry opportunities and build a platform-based optical company. In terms of lidar, as of 2023, according to the company's announcement, Yongxin has formed cooperation with many well-known lidar companies such as Hesai, Tudatong, Valeo, and Innoviz. We are optimistic that with its high-end optical customization capabilities, Yongxin will form a continuous competitive advantage within the industry; in the field of medical optics, the company will actively enter various fields such as endoscopes, surgical microscope optical components, and in vitro testing to help the development of the high-end medical industry. We are optimistic that the company will continue to introduce high-quality enterprise customers at home and abroad to open up an emerging growth curve with its rich experience in optical manufacturing.

Profit forecasting and valuation

The current stock price corresponds to a price-earnings ratio of 25.8 times in 2024 and 20.6 times in 2025. Considering the recovery in the overseas barcode scanning optical business and the company's deep entry into modular products, we raised the company's profit forecast for 2024 by 8% to 314 million yuan, while we introduced a profit forecast for 2025 to 394 million yuan. Based on the demand for inventory replenishment of bar code scanning and the continued upgrading of the company's microscope products, we maintain an industry rating and target price of 105.00 yuan, which corresponds to a price-earnings ratio of 37.2 times/29.6 times 2024/2025, with 44% upside compared to the current stock price.

risks

There is a risk that lidar orders will be lost, exchange rates fluctuate greatly, and microscope product specification upgrades fall short of expectations.