Description of the event

The company disclosed its 2023 annual financial report and financial report for the first quarter of 2024: the company achieved revenue of 2,213 billion yuan for the full year of 2023, a year-on-year decrease of 12.9%, a year-on-year decrease of 13.61%, after deducting non-net profit of 0.42 million yuan, a year-on-year decrease of 37.18%; of these, the company achieved revenue of 563 million yuan in the fourth quarter, -15.42% year-on-year, and net profit of -25 million yuan, a year-on-year decrease of 0.45 million yuan. In 2024 Q1, the company achieved operating income of 445 million yuan, a year-on-year decrease of 3.04%, achieved net profit of 44.543 million yuan, an increase of 226.21% over the previous year, and realized net profit without deduction of 622,900 yuan, turning a loss into a profit.

Incident comments

Domestic demand is recovering, export sales have declined, and the company's operations fluctuated in 2023. With the expansion of the company's automotive optics business, the company's operations reached an inflection point in the first quarter of 2024. The company achieved revenue of 2,213 billion yuan in 2023, a year-on-year decrease of 12.90%, of which revenue from the core components and complete machine business was 2.009 billion yuan, down 12.99%; domestic revenue in 2023 was 1,863 billion yuan, down 12.12% year on year, mainly due to reduced revenue from the TOC business due to weak demand in the consumer electronics market; overseas revenue in 2023 was 350 million yuan, down 16.81% year on year, mainly due to a decrease in overseas light source sales. In 2023, the company's gross margin increased by 3.58 percentage points year on year, while operating expenses were strictly controlled. The sales expenses ratio increased slightly by 0.41 percentage points year over year, the management expenses ratio decreased by 0.52 percentage points year on year, and the R&D expenses ratio increased 2.38 percentage points year on year. Overall, the company's operating profit margin improved slightly. The company achieved revenue of 445 million yuan in 2024 Q1, a year-on-year decrease of 3.04%, or thanks to the automotive optics business entering a revenue contribution period, the first fixed-point model, the M9, entered intensive mass production and delivery stage in March 2024. 2024Q1's automotive optics business revenue was 4802.68 million yuan. At the same time, the film market experienced both supply and demand, and the cinema business showed an upward trend. The company's overall cinema business achieved revenue of 153 million yuan in 2024 Q1, an increase of 21% over the previous year; Fengmi Technology achieved reasonable control and optimization of expenses during the 2024 Q1 period, and overall operating quality continued to improve. Losses decreased by 14.6943 million yuan year on year, and the loss margin decreased by 40.12% over the same period, which combined to reverse the company's losses after deducting non-net profit in the first quarter of 2024.

The company is empowered through R&D, and subsequent new products are expected to drive an upward trend in revenue scale. Since entering the field of automotive optics, the company has unswervingly increased investment in R&D and continuously improved its ability to innovate independently. On April 25, 2024, the company released the world's first all-in-one all-in-one laser headlight, which greatly reduced the total cost of the system and met the all-round requirements of safety, social attributes and personalization. At the same time, the company is increasing the development and promotion of VLED LED cinema projection solutions to further expand the space for the development of the cinema business. In terms of professional display business, in early 2024, the company brought a number of application achievements to the European International Audiovisual Technology and System Integration Exhibition. The new engineering projection product SPro was unveiled for the first time, and actively expanded the international market. With the implementation of core devices driven by the company's technology, the company's scale growth is expected to usher in an upward trend.

Investment advice: The company adheres to and actively promotes the core strategy of “core technology+core devices+application scenarios”, and has a strong technological leadership advantage. At the same time, with the support of the company's basic cinema screening services and professional display business, the company actively expands and implements three major applications, including AR-HUD, laser headlights, and vehicle displays, laying a solid foundation for the company's subsequent growth. We expect the company's net profit to be 1.63, 2.38 and 318 million yuan respectively, maintaining the “buy” rating.

Risk warning

1. Changes in the macro environment bring about the risk of demand fluctuations;

2. Risks brought about by the entry of new technology and new competitors to business prospects.