Incident: On December 23, the company stated on the investor interactive platform that the company currently mainly provides relevant precision functional parts and precision structural parts for AR/VR/MR terminal products for mainstream international customers.

Competitiveness is steadily improving, and the AR/VR industry is expected to reach an inflection point. On December 23, the company stated on the investor interactive platform that currently the company mainly provides related precision functional parts and precision structural parts for AR/VR/MR terminal products for mainstream international customers. The current market is affected by uncertainties such as macroeconomic fluctuations and changes in consumption capacity. The international data company IDC predicts that in 2024 the Chinese AR/VR market will be 0.535 million units, a year-on-year decrease of 26.3%. However, due to the integration of AI, the addition of new players, technological innovation, etc., IDC predicts that the Chinese AR/VR market is expected to take a turn in 2025, and shipments are expected to increase 114.7% compared to 2024, and global AI terminals are expected to explode. The company mainly provides production services and overall solutions for precision functional parts and precision structural parts for AR/VR terminal products, directly benefiting from the growing trend of the global AR/VR market. On the one hand, the company strives to maintain high-end customer resource relationships. With stable production, active market expansion, high-quality products and perfect service, the company has established a good reputation and brand awareness in the industry and customers, and has established stable cooperative relationships with many mainstream international customers, further enhancing the company's brand influence, and helping the company obtain synergies and maintain a good level of profit. On the other hand, the company continued to increase investment in technology research and development. The company's total R&D investment in the first three quarters of 2024 was 0.32 billion yuan, an increase of 28% over the previous year. It closely followed market trends and the evolution of new technologies, continuously increased investment in core product process research and development, and was committed to developing products with high technical content and high added value. It has completed process verification and maintained a high level of order delivery efficiency.

Actively deploy two-wheel drive for overseas production lines, consumer electronics and new energy vehicles. The company achieved total revenue of 3.593 billion yuan in the first three quarters, an increase of 17.03% over the previous year. Judging from the long-term strategic layout, the company will continue to focus on the two core markets of consumer electronics and new energy vehicles, and consolidate and expand its market share with its technological innovation capabilities and global layout to meet the growing market demand for precision structural parts and functional parts. In the first half of 2024, the NEV market continued to heat up. Now the NEV high-power wireless charging system business has entered the implementation stage. The subsidiary has accumulated the ability to provide wireless charging solutions to NEV customers, and has continuously improved its comprehensive strength in technology research and development, product quality and supply capacity. Furthermore, the construction of a full-process production line for hydrogen fuel cell metal bipolar plates has been completed and is currently being put into mass production, continuously optimizing production sales and the level of automation, making it a new growth point for the company. At the same time, with regard to the layout of folding screen phones, it emphasizes its own technical reserves and cooperation with many well-known consumer electronics brands, and will continue to improve the level of folding technology research and development and strive for mass production and supply of more customer products. Currently, the company is constructing overseas factories, engineering construction and production line equipment transfers at plants in Mexico and Vietnam, and is expected to be put into operation in 2025.

Profit forecast and investment rating: We are optimistic that the company is based on two-wheel drive for consumer electronics and new energy vehicles, which is expected to benefit the core in the future where AI terminals continue to explode. We predict that in 2024/2025/2026, the company's net profit to mother will be 0.34/0.39/0.46 billion yuan. The current market value corresponds to PE of 33/28/24 times, maintaining the “buy” rating.

Risk warning: Consumer electronics demand falls short of expectations, AR/VR industry recovery falls short of expectations, company customer verification and expansion progress falls short of expectations