Summary of events: on August 11, the company released the 2022 mid-term report that the company's 22H1 realized operating income of 168 million yuan, an increase of 25.0% over the same period last year, a net profit of 27 million yuan, an increase of 18.5% over the same period last year, and a net profit of 22 million yuan, an increase of 32.6% over the same period last year. From the perspective of Q2 single quarter, the operating income was 90 million yuan, up 15.7% from the same period last year, 15.7% from the previous month, and the net profit from the home was 16 million yuan, up 9.5% from the same period last year and 59.3% from the previous year.

Despite the disturbance of the epidemic, the performance is very resilient, and the demand in the field of optical communications continues to improve: under the influence of the repeated epidemic in the first half of the year, the company's revenue and return net profit still achieved an increase of 25.0% and 18.5% compared with the same period last year. On the one hand, because the company is actively exploring the market for optical communications and fiber laser downstream applications, on the other hand, the overall high economy in the digital communication field in the first half of the year also drives the company's downstream optical communication demand to continue to improve. North American cloud giant Amazon.Com Inc / Meta/ Microsoft Corp / Alphabet Inc-CL C recently disclosed that 22Q2's CAPEX totaled US $37 billion, an increase of 19.9% over the same period last year and 4.2% over the previous year, and the annual guidelines were in line with market expectations. Therefore, the demand for optical communication is expected to continue in the second half of the year. At the same time, the company's fund-raising projects have been carried out steadily, and the production capacity has continued to climb to help the company's order delivery increase. from the perspective of subdivided products, the revenue of molded glass aspheric lenses in the first half of the year increased significantly compared with the same period last year.

Continue to increase R & D investment and strengthen product advantages: the company's R & D expenditure rate has continued to increase in recent years. From 2018 to 2021, the R & D expenditure rate was 5.7%, 6.5%, 7.4%, 8.2%, respectively, in the first half of 2022. The R & D expenditure rate further increased to 8.3%. The continuously increasing R & D investment has established the company's technological leading position in the field of optical components, relying on its four major technology platforms, "Optical thin Film Technology platform", "Precision Optical Technology platform", "molded Glass aspheric Technology platform" and "Optical Fiber Devices Technology platform", the company continues to promote the field of optical communication & the domestic substitution of high-end products in the field of optical fiber laser. At the same time, the company also focuses on the research and development of emerging fields, the continuous promotion of vehicle lens projects, lidar-related array FAC Lens manufacturing, holographic diffraction grating projects, and large field-of-view two-dimensional waveguide film projects in the field of AR.

The expansion and acceleration of emerging fields will help the company to open up the space for future growth: the company in the field of lidar can provide many kinds of precision optical elements, such as lenses, window slices, filters, prisms, mirrors and so on. mainly used in lidar optical transmission system. The company has passed the IATF16949 car specification certification last year, and currently continues to promote the adaptation certification work with downstream mainstream customers, the relevant products are in the stage of sample delivery or small batch verification, and the overall progress is expected. In the field of biomedicine, the company is currently actively expanding overseas. In order to further develop the North American market, the company has set up a North American subsidiary responsible for providing sales and services of optical components to North America.

Investment suggestion: we estimate that the homing net profit of the company from 2022 to 2024 will be 0.90 plus 1.37 billion yuan respectively, corresponding to the PE multiple of 48X/31X/23X. As a technology-leading manufacturer in the field of precision optical components and optical fiber devices, the company will continue to promote the domestic substitution process of high-end products based on its own technology platform. On this basis, the company continues to expand the downstream application scenarios of its own products, and in the future, with the volume of downstream demand, it will further give the company performance flexibility and broad space for growth. Maintain the recommended rating.

Risk hint: downstream optical fiber laser and optical communications demand is not as expected, new areas of expansion is not as expected.