4Q23/2023: Annual revenue reached a record high. It is expected that production capacity will gradually be released, and Jucan Optoelectronics will release its annual report. In 2023, it achieved revenue of 2,481 million yuan (yoy: +22.30%), net profit of 121 million yuan (yoy: +291.41%), and deducted non-net profit of 122 million yuan (yoy: +166.28%). Of these, 4Q23 achieved revenue of 652 million yuan (yoy: +33.95%, qoq: +3.67%) and net profit of 44.07 million yuan (yoy: +147.36%, qoq: -15.26%). Driven by the recovery in terminal demand in the market, the company's production capacity was gradually released. In 2023, the company's sales scale reached a record high, driving continuous and steady growth in revenue. We expect the company to achieve revenue of $28.32/3.265 billion in 24/25, with an additional revenue of $3.752 billion for 26 years. Referring to 24 PS, which is 2 times that of comparable companies, considering that the company is already in a leading position in the industry, and that the scale effect of the company's production capacity is gradually being scaled up, 3 times 24 PS is given, and the target price is 12.6 yuan, giving it a “buy” rating.

2023 review: The release of production capacity relieved downward price pressure, and the effects of cost reduction and efficiency showed a gradual recovery in demand for terminals in the 2023 market. The company achieved significant year-on-year revenue and profit growth through production capacity release and excellent product positioning. Production and sales of high-end products such as backlights, high light efficiency, and silver mirror reversals were strong, and the main business revenue of LED chips and epitaxial films increased 10% year-on-year. Due to intense competition in the LED industry, the company's LED chip unit price dropped 3% year on year to 57.51 yuan/piece in 2023, but the gross margin increased by 3.92 pct to 18.21% year on year due to the decrease in product unit cost, and the overall yield of epitaxial film production reached more than 99%. In terms of production capacity, the company's current LED chip production capacity has reached 2.08 million pieces/year (the company's specifications are all 4 inches, calculated as 2 inches), up 8.13% from the end of '22, the capacity utilization rate has increased to 98.45%, and the production capacity under construction is 6.6 million pieces/year, up 40.43% from the end of '22.

2024 outlook: High value+new applications of traditional lighting drive future growth. We believe that the LED industry has passed a stage of rapid growth. The future driving force of the company is expected to rely on the dual drive of high value+new applications of traditional lighting to form a positive cycle of “cost reduction, demand increase, and scale effect”.

With large-scale investment and construction of the Suqian production base, the company's production capacity release effect is obvious. It is expected that future production capacity will rise at a steady growth rate every year. Furthermore, the company's refined operating indicators and production and sales rate are superior to the industry average, and capacity adjustment and economic management are expected to further expand the company's profit margin. In the field of segmentation, the company's Mini/Micro LED chips have entered the phase of accelerated penetration, and application scenarios continue to expand. Automotive MiniLED products will further expand into the front-end market; Silver Mirror flip chips have been verified and will be gradually increased; Mini high-voltage backlight products have solved technical problems, and it is expected that major brand clients will increase product introduction.

Investment advice: Give a “buy” rating, target price of 12.6 yuan. We expect the company to achieve revenue of 28.32/32.65/3.752 billion yuan in 24/25/26, referring to 24 PS, which is 2 times that of comparable companies. Considering that the company is already in a leading position in the industry, the company's production capacity is gradually increased, and the scale effect is gradually realized. 3 times 24PS, corresponding to the target price of 12.6 yuan, a “buy” rating.

Risk warning: Market competition intensifies, production capacity release falls short of expectations, R&D progress falls short of expectations.