Event: Company releases 2024 semi-annual report

2024H1's revenue decreased 11% year on year, and net profit to mother decreased 14% year on year. The company achieved revenue of 1.587 billion yuan in 2024H1, a decrease of 11% year over year; realized net profit to mother of 0.096 billion yuan, a decrease of 14% year over year. Looking at a single quarter, 2024Q2 achieved revenue of 0.786 billion yuan, a year-on-year decrease of 22%; net profit to mother of 0.032 billion yuan, a year-on-year decrease of 53%.

The impairment accrual affects the interim results, and it is expected that the company's profit level will continue to recover 1) Downstream demand falls short of expectations, and the company's revenue and profit growth rate has slowed down. The year-on-year growth rates of 2023Q3-2024Q2's revenue were 2%, 26%, 2%, and -22%, respectively, and the year-on-year growth rates of net profit to mother were 443%, 471%, 44%, and -53%, respectively, which slowed somewhat.

2) 2024H1's gross profit margin was 26.75%, up 2.33 pct year on year; net profit margin was 6.18%, down 0.33 pct year on year, mainly due to the company accruing credit impairment and asset impairment totaling 0.084 billion yuan.

3) In 2023, the company's laser sales reached 0.159 million units, an increase of 16.39% over the previous year. Of these, sales volume of more than 10,000 watts was nearly 6,000 units, an increase of nearly 80% over the previous year. The domestic market share is leading, and the company's high-power business continues to expand at an accelerated pace.

4) In 2023, the company's overseas business revenue reached 0.14 billion yuan, an increase of 135% over the previous year. At the same time, the gross profit margin of 37.48% was also significantly higher than that of the domestic market of 25.54%. The overseas market is also expected to open up new room for the company's growth in the future.

The company will benefit from a recovery in downstream demand and profit recovery in the short term, looking at high-power and high-end sector expansion 1) According to data from the National Bureau of Statistics, the manufacturing PMI in July was 49.4%, down 0.1 pct from month to month, up 0.1 pct year on year. Overall, better than last year, lasers are expected to continue to benefit as a general manufacturing industry.

2) According to the China Laser Industry Development Report, medium- and low-power fiber lasers below 6kw have basically been localized in 2021, while the localization rate for high-power products is only about 50%, and there is still room for improvement.

3) The competitive pattern of the domestic fiber laser market is three-legged. IPG, Ruike, and Chuangxin had a market share of 74% in 2021. In the context of the price war, small and medium-sized manufacturers continued to withdraw, and industry concentration is expected to increase further.

4) As an enterprise under the State Assets Administration Commission, the company continued to increase R&D, and the 2024H1 R&D cost rate reached 9.8%.

In 2024, the company expects sales of related transactions to be 0.28 billion yuan, an increase of 51% year-on-year compared with the actual amount generated in 2023. In the future, high-power, high-end markets, and special applications are expected to become a new driving force for the company's development.

Radico Laser: The compound net profit growth rate for the next 3 years is expected to be 34%. The company's net profit to mother is expected to be 0.28, 0.4, and 0.53 billion yuan in 2024-2026, up 28%, 43%, and 32% year-on-year, CAGR = 34%, corresponding PE is 28, 20, and 15 times. Maintain a “buy” rating.

Risk warning

1) The industry price war intensified; 2) The expansion of high-power and high-end markets fell short of expectations.