This report is read as follows:
Downgrade profit forecast, maintain target price, give overweight rating; three quarters report in line with expectations, revenue picked up month-on-month; set up overseas subsidiaries to plan for greater development.
Main points of investment:
Downgrade profit forecast, maintain target price, and give overweight rating. The company reported a loss in the third quarter of 2023. Considering that it will take time for the industry to recover, we adjust the net profit from 2023 to 2025 to 23 million / 83 million / 127 million (- 49.57% 20.15% 11.49%), corresponding to an EPS of 0.05, 0.18 and 0.28 yuan. At present, the company carries out a number of high-end chip research and development, and plans to improve the overseas layout, taking into account the average valuation of the optical chip industry, giving 2025 PE 63x, maintaining the target price of 17.50 yuan, and giving an overweight rating.
The three-quarter report was in line with expectations and revenue picked up month-on-month. 2023Q3's revenue was 211 million yuan, down 17.34% from the same period last year, and its net profit was-9.92 million yuan. In the short term, the digital communication market is weak in the first three quarters of 2023, and the company is greatly affected by the industry in the short term, but with the outbreak of AI, we expect the global 200G/400G demand to pick up in the next six months. The company's revenue in the third quarter has increased by about 15% compared with the previous quarter, and the gross profit margin has also increased by about 4.77%. We believe that the company's AWG, parallel optical components, CW optical chips, optical fiber connectors and other product matrix is relatively complete, and is expected to restore the growth curve.
Set up overseas subsidiaries to plan for greater development. The company announced that it will set up a subsidiary in Thailand with an investment of US $5 million, which will come from its own capital, and will be operated in stages with light assets, and the office space and plant will be leased. This foreign investment is in line with the company's overall development strategic planning, and helps to enhance the company's ability to give long-term and sustainable returns to investors.
Catalyst: the investment of overseas subsidiaries has been promoted smoothly, and the traditional digital communication has warmed up.
Risk tips: investment landing, traditional demand warming, optical chip research and development is not as expected.