Core views:

Deeply cultivate technology to break the monopoly of foreign companies and build a leader in domestic fiber lasers. In 2007, Huagong Technology, a leading laser company, cooperated with Yan Dapeng, a leading talent in fiber laser technology, to establish Ruike Laser to lead industry alliances and break the monopoly of foreign companies in the field of fiber lasers by relying on their own core technology. In recent years, the company's laser sales volume has grown rapidly from 0.018 million units in '17 to 0.159 million units in '23.

The laser market is fiercely competitive, and domestic fiber lasers have great potential. According to the “China Laser Industry Development Report”, the sales revenue of the global laser equipment market expanded from 9.7 billion US dollars in 2015 to 20.1 billion US dollars in 2022. Among them, lasers are the core of the laser industry chain, and fiber lasers are the mainstream lasers. According to the 2023 China Laser Industry Development Report, the market share of domestic fiber lasers has reached more than 60% in 2022, and the localization penetration rate continues to increase.

Continue to explore multiple dimensions to enhance your competitive advantage. (1) Integrate the upstream supply chain and explore the downstream market. The company realizes vertical integration of the upstream raw material supply chain and actively lays out markets in downstream application fields such as laser medicine and photovoltaics. (2) Continue R&D and innovation to explore new business growth points. The company's technical personnel ratio and R&D expenses are growing steadily, and a rich product matrix is being developed according to the differentiated requirements of the downstream market, pointing to the high-end application market. (3) Actively promote going out to sea. The company's overseas revenue increased significantly in 21-23, with a CAGR of 66.69%. By actively expanding overseas sales and service channels, the company guarantees overseas customer experience both before and after sales.

Profit forecast and investment advice: We expect the company's net profit to be 3.27/ 4.27/0.565 billion yuan respectively in 24-26, up 50.5%/30.4%/32.5% year-on-year respectively. Considering that Ruike Laser is the leading domestic laser base, the new base in Huangshi has just been put into use. At the same time, the company's profit margin is improving. We gave the company a net profit of 30 times PE over 24 years, corresponding to a reasonable value of 17.38 yuan/share, maintaining a “buy” rating.

Risk warning: risk of macroeconomic fluctuations; risk of technological development falling short of expectations; increased risk by industry competition.