An acoustic touch leader, developing a second growth curve and creating a comprehensive sensory experience platform. The company's predecessor was founded in 1993. It initially focused on the development and sale of miniature acoustic devices, then entered the touch and optical business in 2008 and 2009, respectively. With the innovative demand for acoustic and touch products led by the iPhone in 2015, the company's business developed rapidly; in 2018, the company entered a business adjustment period and gradually vigorously developed its own optical business. The company expands its product matrix horizontally, covering all fields of perceptual experience solutions, and actively develops coordination capabilities between products to empower them. In 2023, due to weak demand for downstream terminals and high inventories, etc., revenue for the full year of 2023 was 20.5 billion yuan, down 1% year on year; net profit without return to mother was 410 million yuan, down 28% year on year. The company's business situation improved in the second half of 2023. The gross margin in the second half of the year all increased compared to the first half of the year. Downstream demand gradually recovered, and the company's performance is expected to improve significantly.
Smart cockpits continue, and the infiltration and acquisition of PSS opens a new chapter in automotive acoustics. The MEMS microphone market size will continue to grow steadily in the future, and is expected to reach $3 billion in 2029, with a CAGR of 6.3% in 2023-2029. In the consumer electronics sector, the company has a comprehensive layout of speaker and microphone products, and continues to deliver high-end products. In 2023, SLS Master Speaker shipments exceeded 10 million units. In terms of in-vehicle acoustics, China's smart cockpit market is expected to exceed 100 billion in 2025, with a 5-year CAGR of 12.7%, which is higher than the global growth rate. The company will use the acquisition of PSS as an opportunity to achieve internal and external collaborative development, integrate existing products, services, solutions, and upgrade ecological cooperation, which will accelerate penetration into the global automotive acoustics industry, and in particular expand the automotive infotainment system business.
Self-developed WLG technology has obvious advantages, and glass plastic hybrid lenses continue to be released. The global optical lens market is expected to exceed 75 billion yuan in 2024, with a compound growth rate of 11% during the period 2019-2024. The continuous growth of the optical lens market is due, on the one hand, to the largest downstream application market, the high-end trend of smartphones, and on the other hand, it is positively affected by the release of demand for automotive lenses. (1) In terms of mobile phone lenses, high-end models equipped with glass plastic hybrid lenses are a clear trend in the mobile phone lens industry. Glass plastic hybrid lenses based on the company's self-developed WLG technology have a larger aperture and higher resolution, and are shipped to mobile phone brands such as Xiaomi and Audio. By the end of 2023, the company had shipped nearly 8 million glass-plastic hybrid lenses. (2) In the field of automotive optics, the company can produce a full range of automotive lenses, and the system supports 360-degree scene perception of the car body.
We believe that the profitability of the company's optical business is expected to increase further as WLG's glass lens yield increases and production capacity climbs.
Take advantage of Dongfeng folding screen phones to explore the application of precision structural parts. In terms of electromagnetic transmission, horizontal linear motors have further increased their market share in flagship aircraft with their advantages in start-stop speed, vibration frequency, and conversion efficiency; a bionic tactile laboratory has been set up to continue to strengthen the ability to integrate haptics throughout the link, and attaches great importance to the long-term value of motor modules. In terms of precision structural parts, the company's revenue from mass production and shipment of rotating shafts and cooling products increased by more than 100% year-on-year in 2023. It will continue to expand its high-value business, seize the opportunities of rapid growth in folding screen shipments and increasing terminal demand for cooling, and continue to explore the application of precision structural parts.
Profit forecast and investment advice: In summary, we expect the company to achieve operating income of 257/285/31.5 billion yuan in 2024/2025/2026, an increase of 25.4%/11.0%/10.5% year-on-year, and achieve net profit of 14/19.24 billion yuan, an increase of 91.4%/31.3%/30.9% year-on-year. The current stock price corresponds to 24/25/26 PE, respectively. I am optimistic about the company's accumulation in acoustics and optics and the continuous evolution of industry regulations. It was covered for the first time and gave it a “Highly Recommended” rating.
Risk warning: Smartphone demand recovery falls short of expectations, new product development progress falls short of expectations, and global trade frictions continue.