Event: the company released a semi-annual report in 2023, with revenue of 339 million yuan in the first half of 2023, net profit of 32 million yuan for YoY+7.5%; and 33.67% gross profit for YoY-45.2%;, down 3.68pct from the same period last year. Macroeconomic fluctuations, falling demand and other factors put short-term pressure on the company's performance.
Comments: weak market demand leads to short-term pressure on performance, and investment in new product research and development continues to increase. The company's 2023Q2 realized revenue of 184 million yuan in a single quarter, and YoY+5.5%,QoQ+18.6%; returned to its mother with a net profit of 16 million yuan, YoY-53.6%,QoQ+4.7%. From a sub-business point of view, 2023H1's fiber laser device business achieved an income of 212 million yuan and a YoY+25.2%, gross profit margin of 29.4% (YoY-7.01pct), mainly due to the decline in prices caused by insufficient demand and intensified competition in the industrial laser industry. The revenue of the optical communication device business reached 94 million yuan, and the YoY-2.4%, gross profit margin was 42.8% (YoY+8.90pct). The decline in revenue was mainly due to the decline in market demand in optical communications and data centers, and the increase in gross profit margin was due to the increase in the proportion of sales of high value-added products. On the expense side, 2023H1's sales expenses were 5.37 million yuan, YoY-21.1%; management expenses were 40.28 million yuan, YoY+9.5%, revenue accounted for 11.89%, up 0.22 pct over the same period last year; R & D expenses were 6311 yuan, and YoY+39.7%, invested more and more in R & D of new products such as thin film lithium niobate high-speed modulators and vehicle lidar light source modules.
The large AI model drives the deployment of computing power construction, and the demand for optical devices is expected to recover rapidly. The incremental demand for computing power construction brought about by the wide application of GPT and other AI models this year will be gradually transmitted to the upstream optical module optical devices, coupled with the upgrading demand brought about by the increase of 5G construction bandwidth on the telecom side, the market demand is expected to increase. The company has the ability to design high-speed optical connection components and mass production capacity of customized products in the field of data communication, high-end micro-optical fiber connection products and micro-optical connection products are widely used in high-speed optical modules such as 40Gbps-800Gbps, coherent communication modules and WSS products, and have become the core suppliers of many large data communication companies around the world.
The fund-raising project is progressing smoothly and the high-speed lithium niobate modulator has a broad prospect. With the rapid development of 5G network and data communication, the demand for optical communication backbone network is also increasing. Thin film lithium niobate modulator is the core optical device of optical communication backbone network. With its wide frequency band, good stability, high signal-to-noise ratio, low transmission loss and other advantages, the market share will gradually increase. The company is focusing on the development of 800Gbps and above thin film lithium niobate coherent and incoherent modulators, developing new products in R & D centers and equipment installation and commissioning in chip production centers, and steadily advancing the construction of fund-raising projects.
Profit forecast and investment advice: the company is a domestic scarce supplier of lithium niobate chips and devices, and is expected to fully benefit from the outbreak of demand brought about by technological advances, and maintain competitive advantage in optical communications and optical fiber lasers to achieve rapid growth. It is estimated that from 2023 to 2025, the company's operating income will be 830,000,000 yuan, respectively, 1.1088x1484 million yuan, the net profit of returning to the mother will be 1.33000,000 yuan, respectively, and the EPS will be 1.505yuan per share, which will be upgraded to the "buy" rating.
Risk tips: industry demand is lower than expected, technology upgrading and new product promotion are not as expected.