Incident: Mulai Optics released its 2024 semi-annual report: 2024H1 achieved revenue of 0.241 billion yuan, a year-on-year increase of 0.83%; realized net profit of 0.016 billion yuan, a year-on-year decrease of 45.55%; net profit after deducting non-return to mother of 0.011 billion yuan, a year-on-year decrease of 54.01%.

The revenue structure changed, and the life science and AR/VR testing business was temporarily under pressure: Of the company's revenue in the first half of 2024, semiconductor revenue accounted for 48.96%, life science accounted for 19.96%, AR/VR testing accounted for 4.91%, biometrics accounted for 9.38%, driverless cars accounted for 4.87%, aerospace accounted for 2.68%, and others accounted for 9.24%. 2024H1's life science and AR/VR business revenue declined in the short term. Life science business revenue fell 37.79% year on year, mainly due to downstream customers' obstruction of overseas market promotion and inventory cycle effects; AR/VR testing business revenue fell 40.37% year on year, mainly due to high uncertainty about customer demand in this field.

Actively develop high-end businesses such as semiconductors and enter the core supply chain: In the first half of 2024, the semiconductor sector was in the midst of a wave of localization substitution, and demand for domestic products continued to increase. The company serves lithography machines and semiconductor inspection equipment, and revenue in the 2024H1 semiconductor sector increased by 46.12% year on year. Furthermore, the company's revenue in the driverless field increased by 85.78% over the same period last year, mainly because major customers in this field obtained driverless car promotion orders in more cities in the US.

Continuously strengthen technology research and development capabilities: The company continues to increase investment in R&D resources. 2024H1 spent 33.4343 million yuan on R&D, up 0.59% year over year. In terms of personnel reserves, the company further consolidated its R&D talent team and expanded its R&D personnel to 239, accounting for 23.87% of the total number of employees.

Investment proposal: We expect the company to achieve operating income of 0.54/0.638/0.745 billion yuan and net profit of 0.052/0.065/0.081 billion yuan in 2024-2026. The corresponding PE was 77.99/63.03/50.20 times, respectively, maintaining the “gain” rating.

Risk warning: The downward cycle in the semiconductor market is compounded by overseas supply risks, and demand for semiconductor optical components is slowing down; high-end product development progress falls short of expectations; industry competition is intensifying.