This report is read as follows:
Lower profit forecasts and target prices, give overweight ratings; report in line with expectations, waiting for the digital market to pick up; actively layout optical chips, participate in investment to the downstream layout.
Main points of investment:
Lower earnings forecasts, lower target prices, and give overweight ratings. The company released its mid-2023 report and its losses widened in the first half of the year. Taking into account the report and the industry situation, we downgrade the 2023-2025 net profit to 46 million / 69 million / 114 million (- 25.0% and 13.2%, 1.37%), corresponding to an EPS of 0.10, 0.15 and 0.25 yuan, considering the company's research and development of a number of high-end chips. At the same time, we plan to participate in the improvement of the industrial chain, giving 2025 70x, and lowering the target price to 17.50 yuan (previous value 20.22 yuan). Give an overweight rating.
The report is in line with expectations, waiting for the digital market to pick up. 2023H1's revenue was 329 million yuan, down 23.12% from the same period last year; the net profit of returning home was-17.7 million yuan, while the calculated loss of Q2 was about 14.5 million yuan, which was in line with the performance forecast. In the short term, 2023 will be a small year in the traditional digital market, and the company will be greatly affected by the decline in industry demand in the short term, but with the outbreak of AI, we expect global 200G/400G demand to pick up in the next six months, and the company's passive product matrix such as AWG and parallel optical components is relatively complete, and it is also expected to restore the growth curve.
Actively layout the optical chip, participate in the investment to the downstream layout. The company has developed SOA chip devices, 10G 1270nm DFB, CW DFB and other products, which are in the stage of batch delivery or customer verification. In addition, the company's layout of 50G PON and 100G PAM4 EML is expected to open up the high-end market.
Prior to this, the company announced the "letter of intent to invest", intended to invest 150 million-200 million yuan in Yuhan Optoelectronics as a financial investment, to obtain no more than 30% equity. This matter still needs to be approved by the CFIUS of the United States and the ODI of our country. If we successfully participate in the shares, we think it is expected to promote the synergy of the company's products.
Catalyst: the research and development of EML is smooth, the foreign investment is advancing smoothly, and the traditional digital communication is warming up.
Risk tips: investment landing, traditional demand warming, optical chip research and development is not as expected.