2024Q1 performance exceeded expectations. In 2023, Guangfeng Technology achieved revenue of 2,213 billion yuan, a year-on-year decrease of 13%; realized net profit of 103 million yuan, a year-on-year decrease of 14%; and realized net profit of 42 million yuan without return to mother, a decrease of 37% over the previous year. In the Q1 quarter of 2024, we achieved revenue of 445 million yuan, a year-on-year decrease of 3%; realized net profit of 45 million yuan, an increase of 226% over the previous year; realized net profit without deduction of 01 million yuan, a year-on-year correction. 24Q1 net profit to mother exceeded expectations, mainly due to investment income and fair value changes generated by the company's transactional financial assets, and the company's cost reduction and efficiency results.

The inflection point of the company's operations has been reached, and growth has been confirmed. By business, the automotive optics business has entered a revenue contribution period, laying the foundation for the company's growth. In December 2023, the company officially launched the first fixed-point model, the Wanjie M9, and entered the intensive mass production and delivery stage in March 2024. 24Q1 achieved revenue of 4802.68 million yuan from the automotive optics business. On April 25, 2024, the company unveiled the world's first all-in-one all-in-one laser headlight at the Beijing International Automobile Exhibition. For the first time, functions such as high beam ADB headlights, variable color temperature headlights, high beam lighting, ground information display, and car cinema were integrated into a small-sized headlight module. At the same time, the international car brand Smart Genie #5 concept car showcased the company's laser projector products to create a mobile car cinema. In terms of the basic market business, it continues to contribute profits and cash flow to the company, and the cinema business performance is still strong. The domestic film market showed a significant recovery trend in 2023. The company's cinema screening service business achieved revenue of 369 million yuan, an increase of 37.24% over the previous year. The 2024 Spring Festival box office reached a new high, driving the company's cinema business revenue to continue to improve. 24Q1 The company's overall cinema business achieved revenue of 153 million yuan, an increase of 21% over the previous year.

In terms of professional display business, the company focuses on laying out laser highlight products to enhance product competitiveness and maintain a leading position in the industry.

In 2023, the professional display business achieved revenue of 428 million yuan. Develop the C-side projection business according to local conditions. In 2023, the company will take the lead in achieving ALPD in the household sector? 5.0 commercialization of super full color laser technology to meet the diversified product needs of customers.

24Q1 benefited from effective adjustments to personnel and business structure, Fengmi Technology achieved reasonable control and optimization of expenses during the period. Losses were reduced by 14.6943 million yuan year-on-year, and losses were reduced by 40.12% year-on-year.

Profitability improved significantly in 24Q1. In 2023, the company achieved a gross profit margin of 36.22%, up 3.58 pcts year-on-year. In terms of expenses during the period, sales/management expenses rates were 13.58% and 7.10%, respectively, +0.41 and -0.52 pcts compared to the same period, and the R&D cost ratio was +2.38 pcts to 12.69% year-on-year. The company continued to increase R&D investment in automotive optics and other businesses. Net cash flow from operating activities in 2023 increased 105.29% year over year to 364 million yuan, mainly due to the company's optimized supply chain management, reduction in procurement payments, and receipt of VAT refunds. 24Q1 achieved a gross profit margin of 32.44%, a year-on-year decrease of 2.93 pcts. The sales/management expense ratios were 9.90% and 8.82%, respectively. Compared with -3.16 and -0.40 pcts, the company achieved remarkable results in cost reduction and efficiency. The R&D expense ratio was 12.14%, maintaining a high level. At the same time, arbitration matters between the company and GDC parties are still under investigation. The legal service costs incurred in the arbitration case during the reporting period were 7.5593 million yuan. If this part of the influence is removed, the costs during the period can be further reduced. At the same time, the company's return to mother and non-return mother increased by 7.5593 million yuan. The company's net profit margin on 24Q1 sales was 9.29%, a year-on-year correction.

Maintain an “overstock” investment rating. The company's cinema and specialty display (engineering/business education) business operates steadily, and profits and cash flow are healthy.

In 2024, we will enter the automotive business revenue contribution period. As production and delivery gradually mature, we anticipate that the company's automotive business delivery will usher in profit contributions. The company will continue to expand new targets this year, while building intelligent manufacturing capabilities in the automotive supply chain. In summary, we slightly lowered the company's profit forecast for 2024-2025 and is expected to achieve net profit of 221/301 million yuan (previous value was 239/328 million yuan), and the 2026 profit forecast was 400 million yuan, up 114.4%, 35.9%, and 32.9%, respectively. Corresponding to the current price-earnings ratio of 41 times, 30 times and 23 times, respectively, maintaining the “increase” investment rating.

Risk warning: Market competition is intensifying; the number and attendance rate of movies released in theaters falls short of expectations; in-vehicle business development falls short of expectations.