Incident: The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 754 million yuan in 2023, an increase of 98.35% over the previous year; achieved net profit of 180 million yuan, an increase of 87.27% over the previous year; deducted non-net profit of 162 million yuan, an increase of 370.80 million yuan over the previous year. In Q1 2024, we achieved revenue of 167 million yuan, a year-on-year increase of 95.47% and a decrease of 36.73%; realized net profit to mother of 0.29 million yuan, an increase of 510.63 million yuan, a year-on-year decrease of 66.75%; and realized deducted non-net profit of 0.26 million yuan, which turned a loss into a profit year-on-year, with a year-on-year decrease of 69.35%.

Q1 performance in '24 grew rapidly year on year, and gross margin and net margin improved year on year: the company's performance increased year-on-year for the full year of 2023. Mainly, revenue from the company's main products, optical prisms, glass aspherical lenses, and glass wafers all showed growth. In 2024, the company's performance grew rapidly year on year. The main reason was for the company to seize development opportunities in the fields of consumer electronics, intelligent automobile driving, etc., and revenue from major products all increased year over year. In Q1 2024, the company's gross margin was 34.70%, up 4.26 pcts year on year, down 17.77 pcts month on month; the company's net margin was 17.54%, up 11.96 pcts year on year, down 15.60 pcts month on month; the company's gross margin and net margin increased sharply year on year. In terms of expenses, the company's sales, management, R&D and financial expenses rates in Q1 2024 were 1.64%/6.54%/12.51%/-1.05%, respectively, with year-on-year changes of -0.02/-4.71/-7.82/-2.35pct, respectively. The company's expense ratio declined year-on-year during the period, and the company achieved remarkable results in reducing costs and increasing efficiency.

Deeply involved in the field of optical prisms, the microprism project is progressing smoothly: the company has been deeply involved in the optical component industry for many years. Through continuous investment in technology research and development, quality control, etc., it provides customers with competitive products and high-quality services with quick response, and has now become a quality partner for many world-renowned companies. The company's optical prisms can be mainly divided into three series: microprisms, imaging prisms, and long prisms. Microprism products are used in precision cold processing, coating, lithography, gluing, screen printing and other technologies of optical glass. The production process is complicated and has high angle and surface accuracy. The products are mainly used in various optical modules such as mobile phone periscope cameras. The company's “Microprism Industrial Base Construction Project” was successfully completed in June 2023 and entered the formal mass production stage. After rising production capacity and yield in the early stages, it now has mature production and supply capacity. In 2023, the company's optical prism business achieved revenue of 411 million yuan, an increase of 191.33% over the previous year. It was mainly due to the official mass production of the company's newly developed microprism products for smartphone periscope camera modules, which formed large-scale sales, which brought the company an increase in performance. In order to meet the growing demand for high-end microprism products in the downstream consumer market, the company set up a “Microprism Industrial Base Production Expansion Project” in September 2023 and plans to invest 346 million yuan to improve the production capacity of high-precision microprisms. It is expected to be gradually completed and put into operation in 2024.

The optical components market has broad prospects, and the automotive optics+AR business can be expected in the future: according to a report by the China Business Industry Research Institute, China's optical components market is predicted to recover to 160 billion yuan in 2024. With the rapid growth of China's industrial strength and strong government support for scientific and technological innovation, the domestic optoelectronics industry is showing a booming trend. Currently, in the field of application of optical optoelectronic components, innovation in various camera modules, display imaging modules, laser generators and sensing devices is the main incremental market for future optical optoelectronic components. With the upgrading of downstream smartphone camera modules, the maturity and popularization of intelligent automotive driving technology, and the continuous iteration of AR/VR wearable devices, etc., it is directly driving the growth in market demand for optical optoelectronic components. In 2023, the company's glass aspherical lens business achieved revenue of 241 million yuan, an increase of 52.96% over the previous year. Driven mainly by the demand for intelligent automotive driving, shipments of glass aspherical lens products used in automotive 360° surround view cameras and automotive lidars showed a steady growth trend.

In 2023, the company's glass wafer business achieved revenue of 52 million yuan, an increase of 26.10% over the previous year. In 2023, the company continued to vigorously expand the downstream market, cooperate closely with the world's leading optical glass material manufacturers, and continue to deepen partnerships; actively improve and improve the product structure, strengthen customer development, and achieve steady development in the display glass wafer and deep-processed glass wafer business used in AR/VR, automotive LOGO projection, etc.

Raise profit forecasts and maintain a “buy” rating: The company is deeply involved in the optical components industry and provides customers with competitive products and high-quality services with quick response through continuous investment in technology research and development, quality control, etc. We are optimistic that the company's optical product layout is perfect and that new products are progressing smoothly. The glass aspherical lens and glass wafer product business is expected to continue to benefit from the increase in automotive demand and AR product shipments. The company's microprism project is rapidly expanding, and the company's future growth momentum is strong. We have raised our profit forecast. We expect 2024-2026 to achieve net profit of 3.02/4.03/490 billion yuan respectively. The corresponding EPS is 0.75/1.00/1.22 yuan, respectively.

Risk warning: risk of exchange rate fluctuations, downstream demand recovery falling short of expectations, risk of technological innovation, risk of market competition.