Incident: The company released its 2023 and 2024 quarterly reports, and achieved revenue of 587 million yuan in 2023, +21.19% year over year; net profit to mother was 114 million yuan, +59.27% year over year. 24Q1 achieved revenue of 150 million yuan, +35.51% year over year; net profit to mother of 34 million yuan, +140.50% year over year.

24Q1 results slightly exceeded expectations. The year-on-year increase in the company's performance in '23 and 24Q1 was mainly due to increased downstream demand. Combined with the gradual increase in market recognition of the company's products in the fields of integrated circuits and electronics manufacturing, new energy batteries, casting weldments and material testing, the business scale continued to expand, and profitability continued to increase.

Investment in R&D continued to increase, and gross margin increased year-on-year in 24Q1. 1) Gross profit margin: The company's gross margin in '23 was 40.63%, -0.05pct year-on-year. 24Q1 gross margin was 45.79%, +8.27pct year over year. Mainly due to product structure optimization and the increase in the supply ratio of microfocus rays. 2) Period expenses: The cost rate for the 23-year company period was 29.53%, +2.30pct year-on-year. Among them, the sales, management, R&D, and financial expenses ratio was 13.47%, 7.55%, 11.28%, and -2.76%, +2.57, +0.60, +2.06, and -2.93pct compared to the same period.

The company continued to increase R&D investment and market expansion, with sales and R&D expenses +49.76%/48.32% year-on-year.

Continue to promote domestic replacement of equipment and radiation sources, and future growth can be expected. 1) X-ray inspection equipment: Actively expand the product line of X-ray inspection equipment, vigorously expand the application of X-rays in new fields of food safety inspection; and have achieved breakthroughs in high-end online 3D/CT inspection technology in key application areas such as downstream integrated circuits and electronics manufacturing, new energy batteries, casting weldments and material inspection, and the company's products and technology have fully entered the CT inspection era. At the same time, the company is actively deploying AI intelligent inspection technology, independently developing artificial intelligence models for industrial X-ray image inspection, and has achieved full coverage of X-ray AI intelligent inspection in the main business area. In addition, the company increased overseas market promotion and carried out a global layout. Overseas revenue was +74.98% compared to the same period last year. 2) Ray sources: Actively expand the X-ray source product line, add 110, 120, and 150kV microfocus X-ray sources in '23 and achieve sales, and promote research and development of 160KV open microfocus and high-power small-focus ray sources to further narrow the gap between core components and foreign countries.

Profit forecast: Considering the increase in profitability due to microfocus ray source emissions, net profit is estimated to be $181, 2.94, and 427 million yuan for 24-26. Maintain a “buy” rating.

Risk warning: Radiation source import substitution falls short of expectations; production capacity release falls short of expectations; trade frictions intensify.