Incidents. On March 21, the company released its 2023 annual report, and on April 27, the first quarter report of 2024. In 2023, the company achieved operating income of 340 million yuan, a year-on-year decrease of 1.29%; realized net profit to mother of 41.6559 million yuan, a year-on-year decrease of 28.72%. In 2024, Q1 achieved operating income of 93.8867 million yuan, a year-on-year increase of 20.64% and a month-on-month increase of 0.58%; realized net profit to mother of 11.2547 million yuan, an increase of 72.07% year-on-year and 7.51% month-on-month.
Downstream demand is phased out, and the 2023 results are under pressure in the short term. The company's annual performance declined in 2023. Affected by the removal of inventory from downstream optical communication customers, demand from overseas telecom and traditional data centers gradually slowed, and revenue in the optical communication sector declined; downstream demand for industrial lasers recovered steadily, actively exploring customers in AR, automotive, semiconductor equipment, etc., to open up market space. The optical communications sector achieved revenue of 122 million yuan in 2023, a year-on-year decrease of 28.25%; the fiber laser sector achieved revenue of 184 million yuan, an increase of 16.53% year on year; scientific research, biomedicine, consumer optics, semiconductor equipment and other application fields achieved total revenue of 340.57 million yuan, an increase of 104.53% year on year. At the same time, the company promoted the acquisition of GouMax in North America to expand and improve its business layout in the field of optoelectronic test modules and instruments/equipment.
Through a series of initiatives, the company's product line is further extended, and the room for business growth is broadened. In the first quarter of 2024, the company achieved a year-on-year increase in revenue and profit in a single quarter. We believe that as demand in the downstream market picks up, the company's investment in emerging application fields gradually exerts scale effects, and future performance is expected to recover steadily.
Continue to increase investment in R&D and focus on breakthroughs in technological innovation. During the reporting period, the company maintained stable investment in R&D to accelerate the company's technological innovation and upgrading. In 2023, the company incurred R&D expenses of 34.151 million yuan, accounting for 10.05% of revenue. The company continuously strengthened the vertical integration capabilities of the core technology system and continued to build a moat for the company's products around high-end and high-performance optical component products in the fields of optical communication and fiber lasers. In the field of consumer optics, the company is developing product technology for AR nanoimprinted diffraction waveguides and opto-mechanical modules, gradually achieving vertical integration capabilities from optical components and components to opto-mechanical modules.
In the field of intelligent driving, product development projects such as lidar transmission modules and fiber lasers are also progressing steadily, mainly for lidar optical path transmission systems. We believe that the company continues to expand its upstream and downstream business areas, and the relevant holding subsidiaries have successively promoted product technology development or project construction, which is expected to increase the company's overall revenue scale and profitability in the future.
Profit forecast and investment rating: We predict that the company's net profit for 2024-2026 will be 0.79/1.05/137 million yuan, and the current stock price is 49/37/29 times PE, respectively. Given that the company is a high-quality domestic manufacturer of optical components and optical fiber devices, future performance is expected to grow and maintain a “buy” rating.
Risk warning: risk of declining gross margin, risk of differentiated competition, risk of product certification, risk of major customer changes.