The increase in R&D costs optimizes the product structure, and increases in intended orders, and performance is expected to improve marginally.
In terms of profitability, the company achieved revenue of 5.024 billion yuan (down 19.20% year on year) in the first half of 2023, net profit of 582 million yuan (+3.28% year on year), comprehensive gross margin reached 22.80%, and profit maintained a steady upward trend. Looking at the 2023Q2 quarter, we achieved revenue of 2,359 million yuan (down 29.79% year on year) and net profit of 274 million yuan (down 18.86% year on year). The decline in performance was mainly due to the impact of the 5G construction cycle, the reduction in the scale of network terminal business delivery, and the large decline in the company's small station business. 23 R&D expenses in the first half of the year were 300 million yuan (+26.60% year on year), and the product structure was gradually deployed and improved towards high-end products. Overall, on the one hand, the company's high-end optical module orders are expected to grow as capital expenditure from overseas cloud vendors is expected to recover and the demand side of AI applications continues to drive. On the other hand, with the advancement of the “dual carbon” target and the arrival of a large-scale replacement cycle for new energy vehicles, the company's current and intended orders continue to grow. Currently, the company's NEV PTC heater market share is at the top, and the company's performance is expected to improve marginally throughout the year.
Perceived that business revenue was growing rapidly, leading market share, and the release of overseas markets helped improve performance.
Judging from the product structure, the intelligent manufacturing business reached 1,473 billion yuan (down 9.53% from the previous year). The 3D five-axis laser cutting intelligent equipment for laser cutting series products received batch orders from leading new energy car companies, and its market share steadily ranked among the highest in China. Orders for automated multi-head laser blanking production lines for auto parts companies increased by 50%, and sales of high-end products such as ultra-high power fiber laser cutting intelligent equipment in high-end overseas markets such as Europe and Southeast Asia increased 35% year-on-year. The company focuses on the two high-quality tracks of new energy and intelligent manufacturing, and expands new spaces such as 3C electronics, automotive electronics and new energy, PCB microelectronics, and semiconductor panels. The business is expected to maintain rapid growth. The connectivity business reached 1,837 billion yuan (down 43.74% year-on-year). In the context of accelerated increase in computing power, the company vigorously promoted the data center business, successfully positioned the resource pool of leading Internet vendors, and delivered a full range of optical modules of 400G and below; 800G series products have been sampled by top Internet vendors; and actively promoted the application of silicon optical technology. It now has full self-research and design capabilities from silicon optical chips to silicon optical modules, and continues to consolidate its position as the world's top 8 optical module supplier industry. The sensing business achieved 1,461 billion yuan (+45.31% year-on-year). The company maintained its leading position in smart home sensors and PTC heaters for new energy vehicles, and the sensor business was actively exploring the “three new” markets. The sales scale of the NEV and intelligent connected vehicle market increased 76% year on year, and PTC heater shipments for NEV increased 107% year on year. The main contribution came from the volume of new projects for new models such as Zero Run, Geely Galaxy, Ideal, NIO, and Changan Deep Blue. Shipments of vehicle temperature sensors increased 46% year on year. Air quality sensors were sold in batches at Avita and BYD, and light and rainfall sensors received tens of millions of orders from overseas. The laser holographic film business achieved revenue of 194 million yuan (down 34.27% from the previous year). The company is deeply involved in tobacco and alcohol packaging and card security services, and continues to expand application scenarios into the field of home appliance decoration and automotive interior decoration.
With the development of industries such as new energy, new infrastructure, and new materials, the company is expected to open up new market space.
Maintain high gross margins and highlight advantages in multiple business areas to help increase global computing power demand in the digital age.
The company's various businesses maintain high gross profit, and its profitability continues to improve. Products in the field of digital communication meet market demand and are upgraded to high-end. We are optimistic about the company's performance in the second half of the year and the room for long-term performance growth. Combined with the company's latest performance, we gave the company 2023E-2025E gross profit forecasts of 1,043 million yuan, 1,311 billion yuan, and 1,701 billion yuan. The corresponding EPS was 1.04 yuan, 1.30 yuan, and 1.69 yuan, and the corresponding PE was 31.33 times, 24.93 times, and 19.21 times, maintaining the “recommended” rating.
Risk warning: exchange rate fluctuations; raw material prices rising; risk of fluctuations in customer demand; increased market competition, new product marketing falling short of expectations.