The company released its 2023 annual performance report. It is expected to achieve annual revenue of 819 million yuan, an increase of 14.64%; achieve net profit of 92 million yuan, a year-on-year decrease of 9.23%; and achieve net profit of 54 million yuan after deduction, a year-on-year decrease of 36.71%.

The company's overall performance growth in 2023 was under pressure, and profitability declined. On the one hand, it is related to demand-side factors such as changes in the macro environment, sluggish demand in the industry, and inventory removal from downstream customers. On the other hand, fierce competition also led to a drop in the price of related products, leading to a decline in gross profit, which ultimately led to a year-on-year decline in net profit after deduction. The company's weighted average ROE also fell to 4.60% from 9.29% in 2022.

2023Q4's revenue resumed high growth, and batch shipments of new products contributed significantly to the increase. The 2023Q4 company expects to achieve revenue of 270 million yuan in a single quarter, up 85.4% year on year and 42.3% month on month. The high revenue growth is mainly due to the application and shipment of products such as L++ optical amplifiers, C++ optical amplifiers, and OXC optical backplanes launched by the company in the upgrade and construction of China Mobile's next-generation 400G backbone network, which clearly boosts revenue.

The 2023Q4 company expects to achieve net profit of 0.26 million yuan in a single quarter, up 33.5% year on year and 39.9% month on month. The profit growth rate is lower than the revenue growth rate, or it is related to the company's rapid growth in R&D investment and market development related expenses. According to the 2013 semi-annual report, the increase in R&D investment in the first half of the year was mainly used to improve the product line of coherent and incoherent optical modules above 100G. The company launched a variety of new products, including 400G and 1.2T related modules, low-power 800G products based on thin-film lithium niobate technology, and simultaneous pre-development of LPO.

The company announced the 2023 restricted stock incentive plan (draft). For the assessment year 2024 to 2026, the company uses operating income or net profit as the performance assessment target. The 330 incentive targets account for 46.61% of the company's total employees, covering a wide range of coverage, providing a boost for the company's performance growth and employee motivation in the next few years. Looking forward to the future, the national 400G backbone network upgrade has begun, driving the company's demand for new products. Along with the recovery in demand and the release of the company's production capacity, the revenue scale is expected to reach a new level.

Investment advice: The company's net profit for 2024-2025 is expected to be 130.163 million yuan, corresponding to PE of 34/27X, respectively, to maintain an “increase in holdings” rating.

Risk warning: Market competition intensifies; market demand falls short of expectations; pressure to reduce product prices is high.