In 2023, the company's revenue increased 16%, and net profit to mother increased 4%. The company's 2023 operating income was 5,076 billion yuan (YoY 16.01%), net profit of 600 million yuan (YoY 4.15%), net profit after deducting non-return of $523 million (YoY 2.72%); of these, 4Q23 revenue was 1,527 billion yuan (YoY 30.05%, QoQ -9.96%), net profit attributable to mother 162 million yuan (YoY 68.83%, QoQ -37.64%), net profit of non-return mother was 157 million yuan (YoY 82.46%, QoQ) -38.28%). 2023 gross profit margin 27.81% (YoY 0.91pct), of which 4Q23 gross profit margin 29.70% (YoY 3.17pct, QoQ 1.13pct).
In the first quarter, revenue increased by more than 53%, and net profit to mother increased by more than 92%. The company's 1Q24 revenue was 1,345 million yuan (YoY 53.41%, QoQ -11.89%), net profit to mother of 179 million yuan (YoY 92.49%, QoQ 9.96%), net profit after deducting non-attributable net profit of 170 million yuan (YoY 170.77%, QoQ 7.88%); gross profit margin 24.00% (YoY -0.36pct, QoQ -5.70pct).
Successful mass production of miniature optical prism modules supports the company's positive sales growth. In 2023, the optical components business revenue was 2.446 billion yuan (YoY 21.11%), accounting for 48.2%. The company's miniature optical prism module project was successfully mass-produced in June 2023, becoming the world's first mass production supplier of quadruple reflection prism modules. This new product has become the core business supporting the company's positive sales growth, opening a new level of cooperation with major North American customers.
Thin-film optical panels expand terminal categories and continue to deepen cooperation with major customers. In 2023, thin-film optical panel business revenue was $1,849 million (YoY 17.77%), accounting for 36.4%. The thin-film optical panel business continues to increase cost and yield advantages, continuously deepen cooperation with major North American customers, continue to expand terminal categories and shares, and expand business scale; in terms of strategic layout, strategic planning for overseas projects has been initiated to enhance overseas delivery capabilities.
Vehicle HUD has won more than ten fixed-point projects, and AR/VR continues to be verified and broken through. Vehicle Optoelectronics and AR/VR business revenue in 2023 was $291 million (YoY 54.39%), accounting for 5.7%. The company shipped more than 200,000 HUD units in 2023. Among them, AR-HUD ranked first in the domestic market share and became the first Chinese HUD Tier 1 enterprise to enter mainstream overseas vehicle brands. In terms of AR/VR, the company focuses on the development of reflective and diffractive optical waveguide technology, and continuously achieves technical breakthroughs in design, process and inspection around mass production.
Investment advice: The target price is 17.41-18.57 yuan, which gives a “superior to the market” rating for the first time coverage. We are optimistic about the company's competitiveness and leading edge in the optical industry, and the performance growth opportunities brought by absorption and reflection composite filters, prisms, chip coatings, etc. in the optical components business, as well as the R&D and mass production capabilities of automotive electronics and AR optical waveguide devices. The company's net profit for 2024-2026 is expected to increase 34.4%/21.2% year-on-year to 8.07/9.78/1,186 billion yuan. Based on the relative valuation, the target price was 17.41-18.57 yuan, and the first coverage was given a “superior to the market” rating.
Risk warning: valuation risk; risk of profit forecasting; risk of business concentration and dependence on major customers; risk of organizational capacity not matching strategic transformation risk; risk of industrialization of technological achievements falling short of expectations; risk of loss of core technical personnel; risk of macroeconomic fluctuations and industry competition; risk of falling price levels; exchange rate risk.