Overview of events
The company released its semi-annual report on August 28, 2020. The company achieved 1.424 billion yuan in revenue in the first half of the year, down 1.78% from the same period last year. Its net profit was-57.38 million yuan, and its performance turned into a loss over the same period last year. In 2020, Q2 achieved revenue of 8.55 yuan in a single quarter, an increase of 12.54% over the same period last year and 50.26% month-on-month growth. The net profit of its parent was 1.6 million yuan, down 84.06% from the same period last year.
The epidemic and production capacity affect performance and are expected to improve gradually in the second half of the year.
The company's performance in the first half of the year was affected by the global epidemic and insufficient production capacity, and is expected to improve in the second half of the year. The main impact of the company's performance in the first half of the year was the decline in overseas orders, the shortage of raw materials and rising costs for ICT terminal products, the serious shortage of components and the lack of production capacity of optical modules in Shanghai.
It is expected to be improved in the second half of the year. At present, the Shanghai production base already has the batch production capacity of 25G, 100GNRZ and 100G/200G/400G PAM4 optical modules, and completed the trial production, prototype production and batch delivery of a full range of products in the first half of the year. The company expects to achieve mass production and delivery of a full range of optical module products in the second half of the year.
The ICT terminal production bases in Wuhan and Xi'an also gradually increased their production capacity and passed China Mobile Limited's examination and approval plant.
The three expenses remain stable and continue to increase investment in research and development.
In the first half of 2020, the company's three expenses remained basically stable and continued to focus on research and development. The R & D expenditure rose to 118 million yuan, an increase of 1.7% over the same period last year, accounting for 8.29% of revenue. In recent years, the company's research achievements in the field of optical modules are prominent. in terms of Datong 100G optical modules, the company has developed 100G CWDM4, 100G LR4, 100GSR4 and other self-developed optical module samples. 400GQSFP56-DD, a high-speed optical module based on silicon technology, is expected to be put into small batch production. In addition, the company's 200GPAM4 optical module engineering samples have been completed and tested, and 800g optical module pre-research work has also been carried out.
Upward market trend of 5G small base stations and high-speed optical modules
The company's WiFi, optical modules, 5G small base stations (ICT terminals) and other products benefit from the strong cycle of the optical communication industry as a whole. The construction of 5G base stations will accelerate around the world in 2020. The demand for 5G small base stations is expected to increase. The company's 5G optical module products gain a share in 2020H1's mainstream communications equipment manufacturer optical module collection. In addition, the demand for 400G optical modules in the data center industry will gradually expand in 2020. Amazon Cloud, the largest, has started buying 400G optical modules in bulk this year. In the first half of the year, the company's annualized production capacity of 100G optical modules is about 320000 units, and it is expected to reach an annualized 800000 units by the fourth quarter; the annual production capacity of 200G/400G optical modules is about 72000 units, and it is expected to reach an annualized capacity of 230000 units by the fourth quarter; the existing annual production capacity of 5G wireless communication optical modules is about 1.2 million units; in addition, there is an independent OSA production capacity of 100000 units, with a total annual production capacity of about 2.33 million units for all products by the fourth quarter. The company's high-end optical module products are expected to continue to contribute to performance increment.
Investment suggestion
The company's optical module business integration is smooth and production capacity is gradually climbing, and the volume of high-end products is expected to continue to break through overseas cloud manufacturers at the same time. Taking into account the impact of the epidemic on the company's capacity expansion and supply chain, we downgrade the company's profit forecast. It is estimated that the company's revenue will be adjusted from 3.931 billion yuan, 5.129 billion yuan and 6.551 billion yuan to 3.163 billion yuan, 3.93 billion yuan and 4.927 billion yuan respectively from 2020 to 2022. The net profit of homing is adjusted from 129 million yuan, 242 million yuan and 312 million yuan to 102 million yuan, 157 million yuan and 267 million yuan respectively, and the corresponding current price PE is 62 times, 40 times and 24 times respectively.
Risk hint
Demand in overseas markets has shrunk as a result of the epidemic; 5G construction is not as fast as expected.