Deeply involved in the optoelectronic device industry, exploring long-distance optical transmission, and stable customer relationships. The company was founded in 2000, formerly known as ZTE Optoelectronics, a subsidiary of ZTE. Its main business covers R&D, production and sales of optical transceiver modules, optical amplifiers, and optical transmission subsystems. It is committed to technical research and product development for long-distance optical transmission. The main products form the technical characteristics of “high speed, long range, and modular”. The company has established long-term and stable cooperative relationships with well-known domestic and foreign optical communication equipment manufacturers such as ZTE, Infinera, and Ciena, telecom operators such as China Mobile and China Telecom, and private network customers such as the State Grid.
400G transmission network upgrade, AI computing power helps development. 1) With the development of 5G-A and 6G technology, and strategic requirements such as East Digital and Western Computing, China Mobile proposed the construction of a new 400G all-optical network. As an important part of transmission networks, the market demand for optical amplifiers is growing rapidly. The company's products such as C++ optical amplifiers and L++ optical amplifiers were first used in 400G backbone network construction. 2) Demand for AI computing power surged, driving the growth in optical module market demand and accelerating the iteration of optical module products to 800G and above. The company has developed an 800G OSFP DR8 optical module with a power consumption of 11W, which is at the leading level of the market and is expected to benefit from this transformation.
Continue to expand production capacity and advance global layout. 1) The company was listed on the Science and Technology Innovation Board in August '22. The fund-raising project can add 1.1 million high-speed optical modules per year. Currently, it is progressing smoothly. The new plant is expected to be completed 24H1, H2 equipment will be commissioned, and part of production will be put into production by the end of '24. 2) The company announced in June 23 that it plans to establish an R&D and production base in Thailand. It can add an annual production capacity of 580,000 optical modules, 30,000 optical amplifiers, and an annual production capacity of 50,000 optical transmission subsystems, effectively enhancing the supply capacity and competitiveness of the company's products in the global market. Production began at the leased plant in Thailand in December '23. At the same time, it is planned to build its own plant in Thailand to improve the overall utilization rate. Land procurement has now been completed, and it is expected to be put into production in 25 years.
Publish equity incentive plans to motivate employees to work. On December 30, 2023, the company announced the 2023 Restricted Stock Incentive Plan (draft). The incentive plan is to grant a total of 2 million shares, accounting for 1.99% of the company's total share capital. Of these, 1,825,500 shares will be awarded for the first time, and 174,500 shares will be reserved. The grant price is 30.00 yuan/share. A total of 330 people were initially awarded incentives, accounting for about 46.61% of the company's total number of employees at the end of '22. For the first time, some performance assessment targets were: the company's revenue for 24-26 was not less than 800, 900, and 1 billion yuan, respectively, or net profit of not less than 1.25, 1.35, and 145 million yuan, respectively.
Profit forecast. As an advanced manufacturer of optoelectronic devices, Decley will benefit from 400G transmission network upgrades and AI computing power requirements, and business revenue will continue to grow steadily. We estimate that the company's revenue for 2023-2025 will be 781 million yuan, 999 million yuan and 1,288 million yuan, respectively; net profit to mother will be 92 million yuan, 140 million yuan and 181 million yuan, respectively, and EPS of 0.91 yuan, 1.39 yuan and 1.80 yuan respectively. Referring to comparable company valuations, the company was given a 2024 dynamic PE range of 40-45X, corresponding to a reasonable value range of 55.60-62.55 yuan, which is “superior to the market” rating.
Risk warning. Market competition increases risks, technological upgrading and iterative risks, and macroeconomic risks.