Revenue for the first half of the year increased 9.6% year over year, and net profit was under pressure. The company released its 2024 semi-annual report, with 1H24 operating income of 0.428 billion yuan (YoY 9.62%); net profit of 0.1 billion yuan (YoY -14.07%), mainly affected by a sharp decrease in exchange earnings compared to the same period last year and a significant increase in R&D investment; net profit of 0.085 billion yuan (YoY 1.60%) after deducting non-return to mother. Among them, 2Q24's revenue was 0.212 billion yuan (YoY 4.86%, QoQ -1.62%), net profit attributable to mother 0.054 billion yuan (YoY -21.13%, QoQ 18.58%), and net profit not attributable to mother 0.045 billion yuan (YoY -13.58%, QoQ 14.14%). 1H24 gross profit margin 38.93% (YoY-1.36pct), of which 2Q24 gross profit margin 40.17% (YoY -1.61pct, QoQ 2.46pct).

Revenue from optical microscopes declined, and revenue from optical components recovered rapidly. By business, the company's 1H24 optical microscope business achieved sales revenue of 0.163 billion yuan, a year-on-year decrease of 12.78%. Based on historical data, industry rules, and the accelerated implementation of equipment renewal policies, the optical microscope business is expected to recover rapidly in the second half of the year. The optical component business achieved sales revenue of 0.254 billion yuan, an increase of 30.95% over the previous year. It is mainly affected by the rapid recovery of bar code scanning business and large-scale mass production of lidar products, and is expected to maintain a good growth trend in the second half of the year.

High-end microscopes were further optimized, and complex barcode scanning components and modules were shipped in small batches. In the first half of the year, under the leadership of the dual engine, the company's microscope team quickly formed targeted solutions based on market feedback, continuously optimized existing optical microscope products, continuously improved the speed of new product development, and significantly enhanced market development capabilities. With the impact of the inventory digestion of leading barcode companies and the rapid restoration of overseas consumer demand, the barcode scanning business rapidly rebounded and achieved significant growth. At the same time, the company is actively promoting the development of new products in the component category, and has already completed sample shipments of various related products.

Sales of lidar optical components have increased dramatically, and new medical optical products have blossomed. In the first half of the year, the company's automotive and lidar business achieved sales revenue of nearly 0.07 billion yuan, an increase of 120% over the previous year. In terms of lidar, the company continues to maintain deep cooperative relationships with well-known domestic and foreign companies such as Hesai, Tudatong, Valeo, Innoviz, Magna, and Tanwei Technology to continuously increase its market share. In terms of medical optics, the medical optical components supplied by the company to the world's leading medical device companies have maintained steady growth, and the endoscopic lenses and optical components developed and produced have covered more than 70% of major domestic endoscope manufacturers.

Investment advice: Adjust profit expectations and maintain a “better than the market” rating. We are optimistic about the gradual recovery of the company's barcode scanning business and the new growth points brought about by emerging fields such as lidar and medical optics. Considering the short-term pressure on the company's optical microscope business, we adjusted the company's profit expectations. We expect 2024-2026 operating income of 1.049/1.382/1.827 billion yuan (previous value of 1.131/1.48/1.903 billion yuan) and net profit of 0.265/0.371/0.482 billion yuan (previous value 0.311/0.402/0.502 billion yuan). The current stock price corresponds to PE 23.3/16.6/12.8, respectively Double, maintaining the “better than the market” rating.

Risk warning: Demand falls short of expectations, raw material price risk, exchange rate fluctuation risk, and increased market competition.