Introduction to this report:
Maintain profit forecasts, maintain target prices, and give ratings to increase holdings; performance is in line with expectations, high-end products continue to be developed; and overseas layout is expected to open up new markets.
Key points of investment:
Maintain profit forecasts, maintain target prices, and give ratings for increasing holdings. The company released its 2023 Express Report with a loss of 47 million yuan, in line with previous expectations. We maintain the 2023-2025 net profit forecast of -0.48/0.47/118 million yuan, corresponding to profit per share of -0.10/0.10/0.26 yuan. Currently, the company is developing a number of high-end optical communication chips and is improving its overseas layout. It is expected to open up new markets, maintain a target price of 12.5 yuan, and give it an increase rating.
The performance is in line with expectations, and high-end products continue to be developed. The company announced the 2023 Express Report, and realized net profit of -47 million yuan in loss. The main reason is that the company is increasing research and development of chips and components such as 400G/800GAWG, parallel optical components, AWG chips with ultra-high refractive index differences, high-speed lasers, and CW lasers. The scale effect still requires a growth cycle, and the company's R&D expenses continue to grow. Furthermore, the company considers the principle of prudence and accrues impairment losses on related assets, so impairment losses, etc. have also increased accordingly.
Promote overseas layout and open up new markets. The company announced on January 16, 2024 that it has completed the filing of relevant government authorities for foreign investment projects and is expected to lay out new product lines and production capacity overseas. We expect that with the continued development of the overseas AI industry, the demand for overseas shipments will increase rapidly, and the company's overseas presence in Thailand is expected to further open up the market.
Catalyst: Overseas subsidiary investment progressed smoothly, and the domestic digital communication market picked up.
Risk warning: Investment implementation, traditional demand recovery, and optical chip development fell short of expectations.