Incidents:

The company released its report for the third quarter of 2024. In the third quarter of 2024, revenue was 2.055 billion yuan, up 21.19% year on year; net profit to mother was 0.435 billion yuan, up 66.99% year on year; net profit after deduction was 0.44 billion yuan, up 72.60% year on year.

Comment:

High-end optical transformation and rapid growth in performance. In the first three quarters of 2023, the company achieved revenue of 4.71 billion yuan, up 32.69% year on year; net profit to mother of 0.862 billion yuan, up 96.77% year on year; net profit after deduction of 0.831 billion yuan, up 127.36% year on year. The main reason for the rapid growth in the company's business performance is the smooth expansion of the product structure and the increase in customer orders.

Microprism was successfully mass-produced in June 2023, and iterative upgrades were quickly completed in 2024 and successfully entered large-scale mass production, continuing to consolidate its market advantage. In addition, absorption and reflection composite filter products achieved a significant year-on-year increase in sales. As the market penetration rate continues to increase, the increase in product volume is expected to further enhance the company's profitability. The company is actively adjusting the market structure to form a global manufacturing and delivery capacity. The Vietnamese factory has built a product line mass production capacity, laying the foundation for undertaking and expanding major customers in North America and Korea.

Automotive electronics are booming, and overseas customers are growing more. The company's AR-HUD products have been fully recognized by customers, actively creating a series of smart cockpit-related products such as smart headlights, electronic rearview mirrors, and car window projections to accelerate the expansion of overseas automotive markets. At present, the company has entered high-quality OEMs such as SAIC Volkswagen and Ideal, and has been designated for more than ten domestic and foreign projects. In overseas business, the company cooperated with international car manufacturers such as Stellantis, BMW, Audi, and Volkswagen to enter the technical cooperation stage for specific projects, and successfully constructed a market pattern where overseas customers blossom more, which is expected to drive a significant increase in profit margins in the automotive electronics sector.

With the deepening of optical waveguide research and development, AR can be expected to grow in the future. The company has one-stop optical solutions for XR equipment from optical materials, optical components, optical waveguide technology and optical machines. The company actively lays out and deepens technology research and mass production breakthroughs in the AR field, focusing on reflected light waveguide technology and promoting the commercialization process of the AR industry.

Profit forecast and investment advice: The estimated revenue for 2024-2026 is 6.531, 7.966, and 9.352 billion yuan, respectively, and net profit to mother is 1.067, 1.213, and 1.544 billion yuan, respectively, corresponding to PE 30, 26, and 21 times, respectively. Covered for the first time, a “gain” rating was given.

Risk warning: downstream demand falls short of expectations, new product development progress falls short of expectations