Incident Overview

The company released its 2023 annual report and 2024 quarterly report.

Revenue side performance is inflection point, and on-hand orders are growing rapidly

In 2023, the company achieved revenue of 582 million yuan, +2.35% year over year, of which Q4 was 255 million yuan, +20.20% year over year, and revenue growth accelerated markedly. By business:

1) Precision laser processing equipment: achieved revenue of 419 million yuan in 2023, -1.78% year-on-year. By industry: (1) semiconductor laser processing equipment revenue of 129 million yuan, -14.21%, mainly due to the decline in industry demand, but the rapid release of new products in the SiC crystal ingot cutting and advanced packaging fields; (2) revenue from new electronic laser processing equipment was 159 million yuan, +23.22% year-on-year, mainly due to a recovery in consumer electronics demand and a significant growth rate of new automotive electronics products; (3) Panel display laser processing equipment achieved revenue of 60 million yuan, -12.42% year-on-year, continued to shrink strategically; (4) The new energy sector achieved revenue of 0.71 million yuan. Compared with the same period, +42.70%, revenue mainly comes from perovskite, laser plate making equipment for printed screen panels, and lithium battery laser film removal equipment. 2) Lasers: Revenue of 48.51 million yuan was achieved in 2023, +17.69%. Among them, revenue from nanosecond lasers was -22.38%, and revenue from lasers such as picosecond, femtosecond, and adjustable pulse width was +66.33%. 3) Laser equipment leasing service: Achieved revenue of 83.19 million yuan in 2023, or -31.97% year-on-year. 4) Laser processing services: Achieved revenue of 27.78 million yuan in 2023, -1.22% year-on-year; 5) Parts sales and maintenance: achieved revenue of 66.61 million yuan in 2023, +29.20% year-on-year.

2024Q1 achieved revenue of 116 million yuan, +18.20% year-on-year, continuing the rapid growth trend in 2023Q4. As of the end of 2024Q1, the company's inventory and contract liabilities were $520 million and 147 million, respectively, +38% and +24% compared with the same period. Ongoing orders are full. As related products confirm revenue one after another, the company's revenue side performance is expected to accelerate significantly in 2024.

The profit side is under pressure in the short term, and subsequent profits are more flexible due to the scale effect. In 2023, the company's net profit due to mother and net profit after deduction were 3905 and 25.19 million yuan respectively, -42.06% and -51.13% compared to the same period last year. The net sales interest rate in 2023 and the net profit margin after deducting non-sales were 6.71% and 4.33%, respectively, year-on-year, -5.15 and -4.74pct, respectively, putting pressure on the profit side in the short term. 1) Gross profit side: The gross margin of sales in 2023 was 46.61%, of which the gross margin of precision laser processing equipment was 44.88% and -4.21pct year on year. This is the main reason for the decline in gross sales margin, mainly due to the decline in the share of revenue from the semiconductor business with high gross margin. In addition, the gross margin of the company's laser business in 2023 was 48.58%, a year-on-year increase of +8.14pct. The main reason was that the company adjusted its sales strategy and focused on promoting sales of ultra-fast lasers such as picoseconds and femtoseconds. 2) Expense side: The cost rate for the 2023 period was 43.16%, +4.25pct year on year, further suppressing the profit level. Among them, sales, management, R&D and financial expense ratios were +0.95, +0.68, +2.83, and -0.21pct, respectively. The company increased R&D investment, and R&D expenses were +22% year-on-year.

2024Q1's net profit to mother and net profit after deduction of net profit not to mother were -726 million yuan and -9.66 million yuan, respectively, resulting in losses. 2024Q1 gross sales margin and period expense ratio were 49.30% and 55.97%, respectively, -2.05 and +3.72pct year on year, of which the R&D expense ratio reached 25.09%, +2.67pct year on year. Looking ahead to the full year of 2024, as new products confirm revenue from on-hand orders, the company's revenue scale is expected to pick up quickly, and profit side performance is expected to recover quickly due to scale effects.

Laser precision processing platform-type leader, continues to break through rapidly in many fields 1) SiC: Successfully developed SiC ingot slicing technology in 2022, completed process development and testing and verification, obtained batch orders from leading customers in 2023, and upgraded and improved products, with the goal of improving material loss, cutting efficiency and cutting yield, and verifying the cutting effect of 8-inch silicon carbide ingots; 2) Micro LED:

Laser mass transfer equipment received the first customer order in 2022, and new customer orders were successfully implemented in 2023. At the same time, massive welding equipment was actively developed, and a full range of solutions including laser peeling, massive transfer, laser repair, and massive welding were launched in the microLED field; 3) Advanced packaging: The layout began in 2021, and in 2023, on the basis of laser grooving (low-k) and wafer marking, the focus is on developing laser fine processing equipment such as glass through hole (TGV), module drilling (TMV), and laser debonding. The product has been ordered and shipped; 4) Perovskite: In 2022, the first generation perovskite laser processing equipment was delivered to the customer and put into use. In 2023, the company launched the second-generation perovskite thin-film solar cell production equipment, and obtained the first batch of orders from leading customers for the GW Line and some new customer orders. 5) Lithium battery: The laser cell blue film removal equipment independently developed in 2022 passed customer verification and received the first order from a leading customer. The order volume was gradually increased in 2023, and laser cell paint removal equipment was further launched in response to customer process needs. It also developed various new products such as roll-to-roll baking equipment and three-station laser baking die-cutting and laminating machines according to customer needs.

Investment advice

We expect the company's 2024-2026 operating income to be 7.07, 8.52, and 1,010 million yuan, respectively, +22%, +21%, and 2024-2026 net profit of 0.69, 0.97, and 133 million yuan, respectively, +77%, +41%, and +37% year-on-year, EPS of 2024-2026 is 0.67, 0.94, and 1.29 yuan, respectively. The 2024/4/26 stock price of 22.76 yuan corresponds to 34, 24 and 18 times PE, for the first time Coverage gives a “gain” rating.

Risk warning

New business expansion falls short of expectations, declining profit levels, declining downstream business conditions, etc.