3Q23's performance exceeded our expectations.
Rand Optics announces 3Q23 results: 1-3Q23's revenue increased by 65.9% year-on-year to 490 million yuan, net profit from home increased by 41.8% to 92 million yuan, and net profit from non-return increased by 111.1% to 75 million yuan. Split to a single quarter, the company's 3Q23 revenue rose 208 per cent year-on-year to 289 million yuan, net profit rose 290 per cent to 70 million yuan, and non-return net profit rose 90.7 per cent to 64 million yuan, exceeding our and market expectations. We believe that the company's 3Q23 revenue to achieve rapid growth is mainly due to: 1) the company's new optical microprism products were successfully put into mass production in June 2023, with the release of new models from major customers in North America, the revenue increased significantly; 2) benefiting from the relatively stable demand of the car lens industry, the company's glass aspheric lens grew steadily. Looking forward to 2024, we suggest that investors pay close attention to the penetration of periscope microprism modules into more potential models of major customers in North America, as well as the demand trend of automotive customers for the company's glass aspheric lens products.
Trend of development
The mass production of new micro-prism products is smooth, and the profit performance has improved steadily. Looking back on 3Q23, the company's overall gross profit margin was 39.2%, a month-on-month increase of 5.2 ppt, and a steady improvement in profitability. In the Pro Max products released by major customers in North America in 2023, the periscope telephoto was introduced for the first time. We believe that the periscope lens can provide a better zoom range and speed. Rand successfully cooperated with North American customers to complete the development of the microprism project. According to the company's announcement, the new microprism was successfully put into mass production in June 2023. With the gradual stock of the new machine, we believe that the increase in production capacity will lead to the gradual improvement of the profitability of the company's prism business. In the future, it is expected to continue to bring new revenue and profit increment for the company. Looking forward to 2024, we believe that the high-quality shooting experience is expected to encourage major customers in North America to infiltrate this technology into more potential models, and investors are advised to pay attention to the production expansion progress and share acquisition of Lante in prism production.
The demand for glass aspheric lens is robust. The company's glass aspheric lens business is mainly divided into imaging and laser collimation, in which the downstream areas of imaging products include more vehicle lens applications. We believe that in the industry trend of automobile intelligent transformation, the growth of the number of on-board lenses can help cars to capture external environmental information more sensitively, and we are optimistic that Lante will continue to benefit from this industry trend, and the revenue of glass aspheric lens is expected to grow steadily.
Profit forecast and valuation
The current share price corresponds to 52.2 times 2023 and 32.8 times 2024 earnings. Considering that the mass production of the company's new microprism products is smooth, we raise the company's profit forecast for 2023 / 2024 by 19% Unix 29% to 150 million yuan / 239 million yuan. We maintain the outperform industry rating, raising the target price by 24% to 23.0 yuan, corresponding to 61.6 times 2023 price-to-earnings ratio and 38.7 times 2024 price-to-earnings ratio, which is 18% upside from the current share price.
Risk
The development of automobile intelligent transformation is not as expected, and the promotion of periscope camera is not as expected.