Revenue grew steadily and profitability declined significantly in the first half of 2023. The company released its semi-annual report of 2023, with revenue of 339 million yuan in the first half of 2023, + 7.51% year-on-year, and net profit of 32 million yuan,-45.22%, year-on-year. In the second quarter alone, the company achieved revenue of 184 million yuan, + 5.54% compared with the same period last year, and realized a net profit of 16 million yuan,-53.60%, compared with the same period last year. Overall, the company achieved steady revenue growth in the first half of the year, but the profit growth rate decreased significantly.
The decline of profitability is related to the fluctuation of external macro environment, the change of industry demand and the increase of internal R & D investment. The main adverse factors affecting the company's operation in the first half of 2023 are as follows: (1) the complex macro operating environment and macroeconomic fluctuations have a negative impact on the company's customer demand, supply chain logistics, production and operation. The war between Russia and Ukraine continued to affect the company's overseas business; (2) the market demand for optical communications and data centers declined in the first half of the year. (3) during the reporting period, the demand of the industrial laser industry was insufficient, the competition in the domestic market was fierce, the price of fiber laser devices decreased compared with the same period last year, and the gross profit margin of the corresponding business continued to be under pressure. In addition, in the first half of the year, the company increased investment in R & D of new products and new processes, such as thin film lithium niobate high-speed modulator chips and devices (the company is focusing on developing 800Gbps and above thin film lithium niobate coherent and incoherent modulators), self-driving car lidar light source modules, etc., and R & D expenditure in the first half of 2023 increased by 17.94 million yuan over the same period last year, an increase of 39.73% over the same period last year.
Plan to release the fixed increase, optimize the product structure, strengthen the overseas layout, and pay attention to the long-term competitiveness. The company issued an announcement in June 2023, proposing to increase the investment of no more than 280 million yuan for the construction and supplementary working capital of the Thailand Light Bank production base project. The focus of this fundraising is on the company's production base project in Thailand, on the one hand, because some of the company's important overseas customers have set up factories in Thailand, the company's Thailand project can better serve the supporting needs of strategic customers; on the other hand, this increase can help the company speed up the layout of lidar laser light source module production line and optimize product structure.
Risk hint: the progress of new products is not as expected, competition is intensified, and profitability is not as expected.
Investment advice: downgrade the profit forecast for 2023-2025 and maintain the "overweight" rating.
Taking into account the slow recovery of industrial demand in 2023, the slowdown in optical communications market demand affecting the company's revenue, downstream price war superimposed R & D investment and other factors affecting the company's profitability, we downgrade the company's profit forecast for 2023-2025, the company's 2023-2025 net profit is expected to be 10.2pm net profit (1.3ppm), corresponding to PE is respectively times 108-87-67. Be optimistic about the follow-up demand repair of the company's industrial end devices and the landing of new businesses such as chips, and maintain the "overweight" rating.