Key investment points

LiDAR active layout. Vehicle cameras are the most widely used and most affordable intelligent technology in automotive sensing systems, and are the core components of advanced driver assistance systems (ADAS) and autonomous driving. The automotive market base is huge. With technological innovation, increased lens penetration, and increased consumer awareness of driving safety, automotive applications have entered a period of rapid growth since 2012. Lidar is an advanced automotive sensing device for ADAS and is the core key sensor for autonomous driving. In the passenger car sector, 2022 is the first year of large-scale mass production of lidar, and the overall industry is also gradually moving from the earliest stage to a stage of rational development. The industry has begun to enter the stage of mass production and reshuffle. Many overseas lidar manufacturers have been delisted, gone bankrupt, or merged and restructured. The overall industry has shown a trend of concentration of leaders, and the domestic market has initially formed a situation where mass-produced lidar solutions such as Hesai, Sagitar, Tudatong, Huawei, and Exploration are the core players.

In addition, with the gradual spread of artificial intelligence, industries in the fields of rail transit, industrial automation, intelligent security, vehicle networking, robotics, and low-altitude aircraft have broad prospects for development. As the key to technology implementation, the overall market is showing a rapid development trend.

Machine vision embraces a new blue ocean. By acquiring, extracting, and processing image information, machine vision provides operation guidance for equipment execution functions, and is widely used in industrial control fields related to automated production lines. Currently, demand for machine vision is increasing in many industries such as consumer electronics, automobile manufacturing, photovoltaic semiconductors, warehousing and logistics, etc., and is gradually expanding to transportation and other non-industrial fields. As a global manufacturing processing center, China is actively developing machine vision applications in the industrial field. According to the “Next-Generation Artificial Intelligence Development Plan” issued by the State Council, China will become the world's major artificial intelligence innovation center by 2030. Machine vision is a very important branch of artificial intelligence. As the level of industrial automation continues to improve around the world, the global market size continues to expand. In the field of machine vision, overseas brands such as Cognex and Jienshi dominate the global market with technological leadership. With the rapid development of smart logistics and Industry 4.0, the machine vision industry has broad room for growth, and at the same time, higher requirements are placed on machine vision.

Optical microscopes accelerate domestic replacement. With the penetration of microscopes in life science, teaching, nanotechnology, and semiconductor technology, there is a clear trend in the development of microscopes towards high accuracy, automation, visualization, and intelligence, and demand for high-end microscopes and automated inspection equipment with microscopic imaging functions is growing rapidly. In recent years, departments at various levels of the country have intensively introduced various policies to support the development of scientific instruments. As domestic enterprises continue to improve their precision manufacturing capabilities, there is huge market space for high-end domestic microscopes and domestic substitution. Scientific instruments are mainly used in R&D and production in enterprises and universities. They are an important tool for achieving scientific and technological innovation and technological progress, and play a key role in achieving new quality productivity. On March 14, 2024, the Executive Meeting of the State Council reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”. Its general requirements state that “it is necessary to speed up the elimination of outdated products and equipment, improve the level of safety and reliability, and promote high-end, intelligent and green development of the industry”. The plan mentions that “by 2027, the scale of equipment investment in industry, agriculture, construction, transportation, education, cultural tourism, medical care and other fields will increase by more than 25% compared to 2023”. Scientific instruments support technological innovation in various industries and are an important part of equipment renewal. The above policy is conducive to boosting the procurement demand for educational, experimental, and medical equipment in domestic universities, hospitals, etc., and has a positive effect on technical equipment in the education sector, R&D and manufacturing of high-end scientific research instruments, and domestic replacement of medical equipment. With the country's policy guidance and increased investment in scientific instruments, healthcare, and life science research, China's high-end microscopy instruments will usher in important development opportunities.

The medical optics market is gradually opening up. With the global population growing, society aging, the rapid development of global economic growth, especially in emerging economies, and the continuous increase in people's demand for healthcare, the global medical device industry has been driving steady growth in recent years. In recent years, the localization and substitution of medical devices has been a key direction encouraged by national policy. In May 2021, the Ministry of Finance and the Ministry of Industry and Information Technology jointly issued the “Guidelines for the Examination of Imported Products Purchased by the Government” (2021 edition), which clearly stipulates the proportion requirements for government agencies (public institutions) to purchase domestically produced medical devices and instruments. In addition, China also has a broad primary market. These primary hospitals are more sensitive to the price of equipment, so high-quality and inexpensive domestic medical equipment will also have a competitive advantage as the market sinks.

l Investment advice

We expect the company to achieve revenue of 0.98/1.3/1.7 billion yuan in 2024/2025/2026, and realized net profit of 0.21/0.32/0.44 billion yuan respectively. The current stock price corresponding to 2024-2026 PE is 49 times, 32 times, and 24 times, respectively, covered for the first time, giving it a “buy” rating.

l Risk warning:

The risk of technological innovation, the risk of exchange rate fluctuations, the risk of changes in the international trade environment, the risk of market expansion with additional production capacity, market demand falls short of expectations.