Net profit to mother is expected to increase 140%-150% year-on-year in the first half of 2024. The company issued a positive profit forecast for the first half of 2024 and is expected to achieve net profit of 1.048-1.092 billion yuan (YoY 140% to 150%) in the first half of 2024. Profit growth was mainly due to the recovery of the smartphone market, and the company's product portfolio improvements led to year-on-year increases in shipments of mobile lenses and mobile phone camera modules, an increase in average sales prices, and an increase in gross margin.
Mobile lens shipments were strong in the first half of the year, and cameras sought differentiated breakthroughs and innovations. The company shipped 0.109 billion pieces of mobile lenses in June (YoY 19.6%, MoM 5.1%); cumulative shipments in January-June were 0.634 billion pieces (YoY 23.7%). Mobile phone camera module shipments in June were 41.622 million pieces (YoY -20.2%, MoM -8.5%); cumulative shipments in January-June were 0.289 billion units (YoY 13.5%). As the consumer electronics recovery trend gradually becomes clear, smartphone brand manufacturers pay more attention to product innovation and specification upgrades, and camera upgrades are still an important gripper leading the differentiated competition of smartphones. The company follows up on customer needs at a high frequency, accelerates the pace of new product development, and customizes high-end products for several smartphone brand manufacturers, including mass production of main camera phone lenses with a large image surface and variable aperture lenses and dual-group focus periscope mobile lenses.
Autonomous driving technology promotes the development of in-vehicle business, and smart cars expand the field of in-vehicle optics. The company shipped 7.64 million pieces of automotive lenses in June (YoY 3.4%, MoM -8.4%); cumulative shipments in January-June were 53.234 million pieces (YoY 13.1%). With the popularity of ADAS systems and the booming development of autonomous driving technology, demand for sensors such as automotive cameras and lidars continues to expand, and technology and specification upgrades lead the rapid development of the industry.
The company has successfully developed innovative products such as a 17 million pixel 2-in-1 front-view car lens and an 8 million pixel glass plastic hybrid cabin surveillance vehicle lens, and has been selected for a major global project of an 8 million pixel automotive module from the world's number one automobile manufacturer. Furthermore, the company continues to explore market opportunities in fields such as lidar, head-up display, and smart car lights, and is expected to become a new growth point for the automotive business.
The VR/AR industry is developing rapidly, and the market is showing a stage of diversified exploration. The addition of new customers in the VR industry and the launch of more new products have injected new vitality into the development of the industry; at the same time, many domestic and foreign technology giants are competing to lay out the AR industry, and terminal AR glasses products are already on the market in some fields. With the gradual improvement of AR-related technologies, application scenarios, ecological fields and industrial chain composition, the overall market demand for consumer-grade AR products is expected to gradually expand. The company continues to deepen strategic cooperation with major VR customers, while continuing to strengthen R&D efforts in AR optical waveguides, optical machines and light engines to enhance large-scale product manufacturing capabilities.
Investment advice: Raise profit expectations and maintain the “better than the market” rating. We are optimistic about the recovery in the performance of mobile phone lenses and camera modules brought about by the upgraded smartphone camera configuration, and we are optimistic about the rapid development of the company's automotive optics field. Considering the company's strong profit growth in the first half of the year, we raised our performance expectations. We expect net profit to be 2.288/2.687/3.231 billion yuan (previous value 1.978/2.52 billion yuan) in 2024-2026. The current stock price corresponds to PE 21.2/18.1/15.0 times, respectively, maintaining a “superior to market” rating.
Risk warning: downstream demand falls short of expectations; progress of new products falls short of expectations; risk of market competition, etc.