Event: The company publishes its 2024 mid-year report.

1) 24H1: Revenue 0.43 billion yuan, +9.6% year over year; net profit to mother 0.1 billion yuan, -14.1% year over year; net profit without return to mother 0.085 billion yuan, +1.6% year over year. Gross profit margin 38.9%, -1.4pct year; net profit margin 23.2%, year-on-year -6.

5pct

2) 24Q2: Revenue 0.21 billion yuan, +4.9% year over month, -1.6% month on month; net profit to mother 0.054 billion yuan, -21.1% year on year, +18.6% month on month; net profit without return to mother 0.045 billion yuan, -13.6% year on year, +14.1% month on month. Gross profit margin 40.2%, -1.6 pct year on year, +2.5 pct month on month; net profit margin 25.3%, -8.6 pct year on year, +4.2 pct month on month.

Revenue growth is driven by a gradual recovery in demand, and 24H2 expectations continue to rise. 24H1's optical microscopes/optical components achieved revenue of 0.163/0.254 billion yuan, or -12.8%/+31.0% year-on-year, accounting for 38.1%/59.3% of total revenue, respectively. The growth in the optical component business benefited from the rapid recovery of the barcode scanning business and large-scale mass production of lidar products, and the company's barcode scanning business maintained a gross profit margin of about 40% over a long period of time. Its revenue growth led to product structure optimization, driving the company's gross margin to increase sequentially. The company expects the 24H2 optical component business to maintain a good growth trend. At the same time, with the accelerated implementation of equipment renewal policies, the optical microscope business is expected to recover rapidly.

Microscopes continue to promote localization, and 24H2 barcode scanning modules will be shipped in batches. The company is one of the few domestic enterprises with independent R&D and manufacturing capabilities for high-end microscopes. At present, it has achieved full coverage of high-end microscope products with a unit price of less than 3 million yuan, and has achieved more than 4% localized replacement. At the same time, it is the company with the largest shipment volume of bar code optical components in the world, and invested in COB production lines to develop various module products, and 24H2 began to gradually ship in batches.

The automotive business grew rapidly, and complete surgical microscope machines were sold overseas. 24H1's automotive business achieved revenue of about 70 million yuan, +120% over the same period. It is the core supplier of leading global lidar companies such as Hesai, Tudatong, and Valeo. As an emerging strategic business, medical optics has achieved growth of more than 50% in the past 2 years. It has developed a variety of extreme precision medical component products and high-end medical devices used in pathological diagnosis, covering more than 70% of important players in the field of core optical components of domestic laparoscopy systems, and has gradually entered the ophthalmology, neurosurgical microscope and high-end fundus camera markets. The entire surgical microscope machine has achieved overseas sales.

Investment advice: Considering the pressure on the microscope business in the first half of the year, we adjusted our profit expectations. We expect the company's net profit to be 0.25/0.31/0.39 billion yuan in 2024-26 (previously 0.3/0.38/0.48 billion yuan), corresponding to PE 22/18/14 times, maintaining a “buy” rating.

Risk warning: The risk of new product launches falling short of expectations, medical business development falling short of expectations, and untimely updates of research and usage information data.