Incident: The company released its quarterly report for the year 24, and 24H1 achieved revenue of 0.421 billion yuan, +24.41% year over year; net profit to mother of 30.34 million yuan, -4.36% year over year; after deducting non-net profit of 23.92 million yuan, +16.85% year over year.

24H1 gross profit margin 35.16% (YoY +1.49pcts), net profit margin 7.20% (YoY -2.17pcts).

Looking at Q2 alone, 24Q2 revenue was 0.261 billion yuan, +42.15% YoY, +63.02%; net profit to mother was 23.85 million yuan, +46.97% YoY, +267.15% month-on-month; net non-net profit 20.96 million yuan, +57.89% YoY and +609.38% month-on-month. 24Q2 gross profit margin 35.55% (YoY +1.85pcts, month-on-month +1.01pcts), net profit margin 9.13% (YoY +0.30pcts, month-on-month +5.08pcts).

Cost control is improving, and R&D investment continues to be increased. 24H1's R&D expenses were 69.22 million yuan, +9.68% year over year, R&D expenses rate 16.43%, -2.20pcts; sales expenses ratio 1.97%, +0.39pcts year on year; management expenses ratio 11.76%, -0.13pcts year on year; financial expenses ratio -0.90%, year on year +2.94 pcts year on year. 24Q2's R&D expenses were 37.74 million yuan, +15.10% year on year, 14.45%, year on year -3.61 pcts; sales expense ratio 2.10%, +0.68 pcts year on year; management expense ratio 10.40%, -1.89pcts year on year; financial expenses ratio -0.76%, year on year +4.00 pcts year on year. The company is increasing investment in research and development of new products and processes, such as thin-film lithium niobate high-speed modulator chips and devices, and lidar light source modules for autonomous vehicles.

AI has driven the growth of optical communication devices, and the company's production and sales of optical communication devices are booming. 1) In terms of optical communication, the optical communication device industry has maintained steady growth, driven by the continuous increase in AI computing power demand. The company actively explores the market and develops new customers. 24H1's optical communication device revenue was 0.161 billion yuan, +45.11% year over year; output was 1.7452 million pieces, +97.69% year over year; sales volume was 1.5275 million units, +67.01% year over year. 2) In terms of fiber lasers, 24H1's fiber laser device revenue was 0.198 billion yuan, with a gross profit margin of 33.83%, a year-on-year increase of +4.40pcts; 3) On the lidar side, in April 2024, the company completed the acquisition of 52% of Shanghai Baian's shares, which was included in the scope of the company's consolidated statements. 24H1's lidar light source module and device revenue was 49.3757 million yuan, a significant increase over the previous year.

Profit forecast. As a thin-film lithium niobate leader, Optical Bank Technology has broad development prospects. Considering that the company's thin-film lithium niobate technology is in a leading position in the world, there is broad scope for future application; the lidar business layout is accelerating, and the company's performance is expected to enter a period of accelerated growth next year. We estimate that the company's revenue for 2024-2026 will be 0.935, 1.227, and 1.617 billion yuan; net profit to mother will be 0.07, 0.124, and 0.174 billion yuan, respectively; and EPS will be 0.28, 0.50, and 0.70 billion yuan, respectively. Referring to the average valuation level of comparable companies, the company was given a 2024 dynamic PS range of 9-11X, corresponding to a reasonable value range of 33.78-41.29 yuan; in terms of segmental valuation, the corresponding reasonable value range was 36.36-45.28 yuan; based on the two valuation methods, the final reasonable value range was 36.36-41.29 yuan; “superior to the market” rating.

Risk warning. Industry demand is picking up and uncertainty, downstream manufacturers are expanding upstream, and industry competition is intensifying.