The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 2.4 billion yuan, +11.6% year on year; net profit to mother 0.15 billion yuan, -17.7% year over year; net profit after deducting non-return to mother 0.13 billion yuan, -16.6% year on year. In 2024Q2, the company achieved operating income of 1.35 billion yuan, +7.7% year on year; net profit to mother 0.11 billion yuan, -27.7% year over year; net profit after deducting non-return to mother 0.1 billion yuan, -22.2% year on year. The company's revenue growth was mainly due to an increase in PV and 3C inspections. The company's profit declined, mainly due to a decline in the gross margin of approved power battery lasers and automation equipment; the company increased investment in overseas business development, sales and management expenses; the increase in the company's loans led to an increase in financial expenses, which in turn led to a year-on-year decline in profits.

Medical lasers: Business skills continue to improve, and product development is in line with expectations.

(1) Large market space: In the field of medical and aesthetic lasers, the number of users in the domestic medical and aesthetic market continues to increase as awareness and acceptance increase. According to data from the New Oxygen Research Institute and Frost & Sullivan, the non-surgical medical aesthetic market is expected to reach 415.7 billion yuan in 2030. According to estimates that optoelectronics will account for 53.30% of non-surgical projects in 2022, it is estimated that the size of the optoelectronic medical and aesthetic consumer market will exceed 200 billion yuan in 2030.

(2) The company's leading technology: Hymson's new high-power long-wavelength tunable mid-infrared femtosecond laser product is a pioneering product in the world. Currently, there are no standard products for this product in the world. It uses optical parameter amplification technology combined with a high performance nonlinear crystal with a wide band gap to achieve watt-level (2 watts) average power and 5-11 micron freely tunable mid-infrared femtosecond pulse output for the first time in the world, increasing the conversion efficiency of near-infrared to mid-infrared femtosecond lasers by an order of magnitude.

(3) The company is in the process of applying for relevant certificates for Class II and Class III medical devices. The main indications for the products that the company has entered Class II medical device certification are dermatology-related products. At present, related products have been basically developed. Products related to hair regeneration and collagen regeneration can be commercialized the fastest according to the indications corresponding to the three types of medical device certificates. The company's hair regeneration products stimulate massive proliferation of sebaceous glands, including hair follicle papillae, after intense irradiation with mid-infrared femtosecond lasers, and promote hair regrowth. They are very traumatic and painful, and will bring customers a very good experience. The company is working with an expert team from one of the top three hospitals in Chengdu to verify the efficacy of mid-infrared femtosecond laser hair growth in humans. Judging from the small sample data, the hair growth effect is quite obvious. Later, it is necessary to go through experimental data from large samples and extend the observation period to consolidate the clinical verification data.

Investment advice: Based on the company's performance and industry conditions, we expect the company to achieve net profit of 0.31, 0.45, and 0.55 billion yuan in 2024-2026, corresponding to PE of 19, 13, and 11X, maintaining a “buy” rating.

Risk warning: Industry competition intensifies, medical laser field expansion falls short of expectations, medical device-related certificates fall short of expectations.