Summary of events: on October 20, the company released its three-quarter report of 2023, with revenue of 247 million yuan in the first three quarters, down 5.91% from the same period last year, net profit of 31.19 million yuan, down 30.45% from the same period last year, and net profit of 24.62 million yuan after deduction, down 34.29% from the same period last year. Judging from the single quarter of Q3, revenue reached 80 million yuan, down 15.25% from the same period last year and 10.46% from the previous quarter. The net profit of returning to the mother was 10.8 million yuan, down 40.00% from the same period last year, 22.05% from the previous month, and deducting 8.2 million yuan from the previous year, down 47.10% from the same period last year and 32.10% from the previous year.
The fluctuation of demand in the field of optical communication & the price reduction of some mature products in the field of optical fiber laser and other factors led to the short-term pressure on the company's performance: the company's revenue and net profit in the first three quarters decreased by 5.91% and 30.45% respectively compared with the same period last year. On the one hand, the telecom market demand in the optical communication field slowed down stage by stage, and secondly, while the downstream optical fiber laser field recovered steadily, The company has taken the strategy of taking the initiative to reduce the price of some products to increase its share. From the cost side, the investment in production facilities increases the fixed cost expenditure such as depreciation and amortization. In addition, typhoon, rainstorm and other extreme weather brought a small amount of non-recurrent losses to production and operation in the third quarter.
AI will boost demand for upstream optical components, and the company is expected to fully benefit: downstream cloud giants have previously focused on continued increased investment in capital expenditure for AI. According to a report released in September 2023, Lightcounting expects global sales of several optical modules to fall by 5 per cent in 2023, not as much as it expected six months ago because of strong demand for 400G and 800G in artificial intelligence clusters. At the same time, Lightcounting has also significantly raised its forecast for 400G/800G optical module sales in the next two to three years, which will lead to a compound annual growth rate of 30 per cent in 2024-2025. The hot demand for AI will push the demand for optical components upstream of highlight modules. The company has outstanding technical strength in the optical field, and some precision optical components can be used in 400G/800G high-speed optical modules.
Continue to strengthen emerging areas and broaden the future growth space: on the basis of consolidating the fields of optical communications and optical fiber laser, the company has actively expanded the layout of biomedical, AR, vehicle, semiconductor and other new application scenarios in recent years, including in the field of semiconductor equipment, the company's multi-band beam splitter can be used in lithography optical system. In addition, the company set up a holding subsidiary in Hefei in June 2023 to expand the business of functional crystal materials and devices, and set up a branch in Nanjing to research and develop nano-imprinted diffractive waveguide products.
Investment suggestion: considering that the demand in the optical communication field still needs to pick up this year, we adjust our profit forecast and estimate that the company's homing net profit from 2023 to 2025 will be 0.50x0.85 trillion yuan respectively, corresponding to a PE multiple of 81X/47X/33X. As a technology-leading manufacturer in the field of precision optical components and optical fiber devices, the company continues to promote the domestic substitution process of high-end products by relying on its own technology platform. The company is expected to benefit from AI's hot push up the demand for optical components. In addition, the company continues to expand the downstream application scenarios of its own products, accelerate the layout of emerging areas, and is expected to further open up room for future growth. Maintain the recommended rating.
Risk hint: the demand in the field of downstream fiber laser and optical communication is not as expected, and the expansion of emerging fields is not as expected.