The performance of the first three quarters stabilized, gross margin rebounded markedly, and the performance of optical communication system upgrades is expected to improve marginally.

In terms of profitability, the company achieved revenue of 10.029 billion yuan (down 2.08% year on year), net profit of 881 million yuan (down 2.08% year on year), net profit of 881 million yuan (+0.59% year on year), net profit after deduction of 710 million yuan (down 10.23% year on year), realized gross profit ratio of 25.98%, and continuous increase in gross margin level; judging from the single quarter in Q3 of '23, achieved revenue of 3.114 billion yuan (down 19.14% year on year), net profit reached 274 million yuan (down 21.84% year on year), net profit from net profit reached 274 million yuan (down 21.84% year on year), net profit from net income reached 274 million yuan (down 21.84% year on year), net profit from net income reached 274 million yuan (down 21.84% year on year), and net profit from net profit reached 274 million yuan (down 21.84% year on year), deducted from the negative The net profit of the later mother reached 146 million yuan (down 55.33% from the previous year), and the gross margin reached 25.45% in the third quarter alone. Considering the continuous improvement in production efficiency and continuous optimization of product structure, the company's profitability is expected to continue to improve. Overall, 5G construction is being upgraded, and the optical network base continues to be consolidated. Demand for optical fiber cables is expected to rise steadily, and the company's performance is expected to improve marginally.

The diversified field layout leads the industry's R&D innovation, and overseas production capacity deployment expands new opportunities for international business.

The company consolidated its leading edge in the main business, and diversified business developed steadily. In the field of optical devices and modules, the synergy with the subsidiary Bochuang Technology has been fully exploited to meet the needs of telecommunications, Internet and other operators. The 10G PONOLT optical module shipment volume is leading in the country. The 25G LR silicon module developed by it for the 5G fronthaul and the 50G PAM4 optical module for the 5G backhaul have achieved large-scale sales. In the field of third-generation semiconductors, the company announced that it is promoting production projects for third-generation semiconductor products represented by silicon carbide (SiC) and gallium nitride (GaN) through its subsidiary Changfei Advanced Semiconductor, which is expected to develop an annual production capacity of 360,000 6-inch silicon carbide wafers and epitaxial, and 61 million power device modules per year. In the field of industrial lasers, Changfeiguangfang, a subsidiary of the company, has achieved large-scale sales, and with leading technical level, the company's 10,000-watt three-layer ytterbium-doped optical fiber won the “Red Light Award” — the “Laser Device Innovation Award” of the China Laser Industry Innovation Contribution Award hosted by the Organizing Committee of the China Laser Industry Innovation Contribution Award and the Laser Manufacturing Network. In the field of marine engineering, Changfei Baosheng Offshore Engineering Co., Ltd., a subsidiary of the company, has initial construction service capabilities and completed the hoisting construction of the first conduit frame for the customer's offshore wind power PB project, achieving a breakthrough in the market. Overseas, the company achieved overseas business revenue of about 2,439 billion yuan in the first half of the year, an increase of 11.58% over the previous year, accounting for 35.27% of the company's total revenue. At the same time, the company is implementing the strategy of localizing overseas sales by actively establishing overseas production bases and overseas offices. Overseas production capacity development is improving. The expansion of production capacity in Indonesia, South Africa, Brazil, Poland and other places has been carried out according to plan. It has been able to cover major target markets and effectively deal with protective trade measures in various regions. At the same time, the company has large-scale integrated development and production of optical fiber prefabricated rods, optical fibers and optical cables, and continues to expand upstream and downstream of the industrial chain. Leading R&D and innovation capabilities are expected to help further increase the company's market share.

The medium- to long-term development trend of the optical fiber optic cable industry will not change, and we are waiting for the industry's prosperity to pick up. In 2023, the volume and price of fiber-optic cable purchases by operators stabilized. China's mobile cable demand was 108.2 million core kilometers, and the maximum price was 7.625 billion yuan, equivalent to 70.47 yuan/core kilometer. The price was basically in line with expectations. The top 5 companies that used share tenders for the project accounted for nearly 70% of the number of successful bidders, and the concentration of shares among leading companies remained high. The company is still in a leading position in the industry, and the company won the bid share of about 19.4%. With future optical communication system upgrades, demand for new products is expected to be stimulated. We are optimistic about the company's future medium- to long-term growth. Combined with the company's latest performance, the company's 2023-2025 net profit forecasts are 1,267 billion yuan, 1,480 billion yuan, 1,706 billion yuan, corresponding to EPS of 1.67 yuan, 1.95 yuan, 2.25 yuan, and corresponding PE of 17.49 times, 14.97 times, and 12.98 times, taking into account leading technical advantages, and maintaining the “recommended” rating.

Risk warning: risk of exchange rate fluctuations; risk of market development falling short of expectations; risk of new product promotion falling short of expectations; risk of developing new business.