Incidents:
Changguang Huaxin issued the 2022 annual performance report announcement on February 27, 2023. In 2022, Changguang Huaxin achieved revenue of 386 million yuan, or -9.98% year on year; it achieved net profit of 125 million yuan to the mother, +8.50% year on year.
Investment highlights:
Demand in the downstream laser market is low, and the company's performance is under pressure in the short term, and is expected to pick up in the future. Changguang Huaxin achieved revenue of 386 million yuan in 2022, or -9.98% year on year; obtained net profit of 125 million yuan, +8.50% year on year; net profit of 8.5038 million yuan after deducting non-return mother's net profit was 8.5038 million yuan, -88.25% year on year. In 2022, Changguang Huaxin's operating revenue declined year-on-year and performance was under pressure in the short term. The main reasons were: (1) the overall slump in laser market demand under the influence of factors such as repeated epidemics and the slowdown in global economic growth; (2) the company actively responded to adverse external factors to explore the market and increased R&D investment, and corresponding R&D expenditure increased by 28.1254 million yuan; (3) the company's new plant was put into use and related expenses amortization increased. Looking at the long term, there is plenty of room for expansion of laser equipment in the fields of new energy vehicles, silicon carbide, and healthcare. Among them, the automotive lidar market is expected to usher in a development window, and the laser equipment industry is improving over the long term. The company has improved production and R&D conditions to lay the foundation for improving enterprise competitiveness. In the future, it may benefit from industry development to achieve a recovery in performance.
The company has been approved by the government for industrial land and plans to invest 1 billion yuan to carry out project construction. The annual output value is expected to reach 600 million yuan after the project is put into operation in 2025. Suzhou Changguang Huaxin Semiconductor Laser Innovation Research Institute Co., Ltd., a wholly-owned subsidiary of Changguang Huaxin, signed a project investment cooperation agreement with the Suzhou Science and Technology City Management Committee on December 27, 2022. It plans to invest 1 billion yuan in Taihu Science City and cover an area of 31 acres to carry out advanced compound semiconductor optoelectronic platform projects. The project plans to develop production lines for 100 million chips and 5 million devices per year. It has production line construction and laser device packaging capabilities for gallium nitride, gallium arsenide, indium phosphide, etc. hair, Includes sealing and testing capabilities for 6-8 inch devices. The project is scheduled to start construction in 2023 and be completed and put into operation in 2025. After completion, the annual output value of the project is expected to reach 600 million yuan and the annual tax payment amount is 34.1 million yuan.
The signing of a new cooperation agreement helps the company expand its market share, and we continue to be optimistic about the development of the laser chip business in the future. The signing of the cooperation agreement is conducive to Changguang Huaxin enhancing its product supply capacity, continuously consolidating and expanding the company's market share, improving the company's optoelectronics industry chain business layout, and complementing resources between the company and local governments. In April 2022, Changguang Huaxin was listed on the Science and Technology Innovation Board to raise capital to build high-power laser chip/device/module capacity expansion projects, vertical cavity surface-emitting semiconductor lasers (VCSELs), and optical communication laser chip industrialization projects. The construction period is three years, and after completion, it is expected to achieve an average annual revenue of 1,168/288 million yuan respectively.
The localization rate of high-power semiconductor laser chips is expected to increase in the future. Continued expansion of automotive lidar and 3D sensing technology may increase market demand for VCSELs, and Changguang Huaxin is expected to fully benefit.
Profit forecasting and investment ratings are based on the principle of prudence. The investment projects signed by the company and the Suzhou Science and Technology City Management Committee are not included in the profit forecast. We expect the company's operating income to reach 386/709/1,062 million yuan in 2022-2024, a year-on-year change of -10%/+83%/+50%, and the net profit of the parent mother was 1.25/2.11/318 million yuan respectively, up 8%/69%/51% year on year. Corresponding to PE 2022-2024 was 131/78/52 times, respectively. Changguang Huaxin is a domestic semiconductor laser chip leader, and it is expected that it will continue to benefit from the increase in the localization rate of semiconductor laser chips in the future. Maintain a “buy” rating.
Risks suggest changes in the capital market environment and risk of fluctuations in loan interest rates, uncertainty about project land use, risk of new technology penetration falling short of expectations, risk of falling product prices, increased market competition, and risk of production expansion falling short of expectations.