Event: the company announced its 2017 annual report that its operating income was 2.057 billion yuan, an increase of 10.57% over the same period last year, and the net profit attributed to the parent company was 84 million yuan, an increase of 77.31% over the same period last year. The company also announced the results forecast for the first quarter of 2018, which is expected to achieve a net profit of 18 million-22 million attributable to the parent company, an increase of 290.46% and 377.22% over the same period last year.

Comments:

First, the performance is basically in line with our expectations, and the growth is mainly due to the increase in the production capacity of optical fiber and cable, the increase in gross profit margin and the substantial increase in the production of optical rod casing. In 2017, the company's optical fiber production capacity reached 25 million core kilometers, optical fiber sales revenue of 1.181 billion yuan, an increase of 7.67% over the same period last year; optical cable production capacity reached 600t, with an income of 439 million yuan, an increase of 20.53% over the same period last year. The output of smooth rod quartz casing reached 137tons, with an income of 51 million yuan, an increase of 53.35% over the same period last year. At the same time, the gross profit margin of the company's optical communications business rose sharply from 9.59% in 16 years to 13.66% in 17 years, mainly due to the increase in the price of optical fiber.

Second, the light stick project is worth looking forward to.

According to the annual report, the main foundation of the 500-ton plant of the company's optical fiber prefabricated bar manufacturing project has been completed, and all 200 tons of imported process equipment for the first phase of the project have arrived, and other auxiliary equipment is being purchased as planned. Trial production is expected to begin in the fourth quarter of 2018. At present, the company's production and sales ratio of optical fiber and optical cable is basically close to 100%, and the subsequent sustained growth will encounter bottlenecks. If the optical rod production capacity can be released smoothly, the company will form a "bar-fiber-cable" integrated industrial structure, which will greatly enhance the company's profitability.

Third, the extension layout Internet SaaS plate

The company has announced its intention to buy 90% of the shares in the micro-venture network by issuing shares and paying cash. The detailed plan has not yet been announced and is still in the advanced stage. According to the company announcement, Mini Chuang Network was founded in July 2015, mainly to meet the Internet transformation needs of traditional enterprises, and is a leading SaaS service provider. Micro-innovation network Internet background is deep, its controlling shareholder Shanghai Micro-Chuang Software is Microsoft Corp shareholding company, the actual control is Tang Jun.

Minimally invasive network products are mainly committed to providing customers with one-stop "Internet +" transformation services, using Internet platform and information technology to provide standardized products, customized systems and tools, and launch Internet + series products and a package of solutions. The main functional modules include: enterprise e-commerce system, brand content system, operation management system, social customer relationship management system and supply chain management system. From the official website, partners include Nivea, Daijin Air conditioning, Unilever and so on.

Fourth, profit forecast and valuation: in the short term, the high prosperity of the company's optical fiber and cable industry and the company's breakthroughs in the field of light sticks, in the medium to long term, minimally invasive networks contribute to the sustained growth of traditional enterprises in the field of Internet transformation and upgrading, as well as the company's sustained layout in the Internet field. Excluding the minimally invasive network for the time being, considering the provision for impairment of some assets, the company slightly lowered its performance forecast from 0.07,0.13,0.16 yuan in 2017-2019 to 0.12,0.14 and 0.17 yuan in 2018-2020, maintaining the "overweight" rating.

Risk hint: optical rod technology breakthrough is uncertain; minimally invasive network acquisition is uncertain.