With its R&D advantages, the company has built a high brand awareness in the field of optical chips and has been widely recognized by the industry. AI applications require large-scale computing power construction, and supporting optical communication networks. Optical chips play a key role as the core of optical communication networks. The company is a leading domestic optical chip and is expected to be the first to replace domestic products in the field of high-speed optical chips. At the same time, the company's forward-looking layout in the field of CW light sources is expected to benefit from the increase in the penetration rate of silicon optical modules. Covered for the first time, a “gain” rating was given.
Deeply involved in the field of optical chips, leading domestic supplier of optical chips. The company has achieved batch supply to the top ten international and mainstream domestic optical module manufacturers such as customer A1, Hisense Broadband, Zhongji Xuchuang Technology, and Mingpu Optoelectronics. The products are used in large-scale domestic and foreign communication equipment vendors such as customer A1, ZTE, and Nokia, and eventually used in well-known domestic and foreign operator networks such as China Mobile, China Unicom, China Telecom, and AT&T. From 2019 to 2022, the company's revenue grew from 80 million to 280 million, with a CAGR of 51.53%.
During the period 2019-2022, the company's main business gross profit was 36 million, 160 million, 150 million, and 174 million respectively. The four-year comprehensive gross margin was 45%, 68%, 65%, and 62%, respectively, and the four-year average gross margin reached 60%. The company's production scale has increased year by year in recent years. The 2019-2022H1 capacity utilization rates are 99.39%, 90.56%, 100.24%, and 90.01%, respectively.
The global optical module market is developing rapidly, and the scale of optical networks has increased across the board, driving domestic replacement of optical chips into the fast track. By 2022, the size of China's optical chip market had risen to US$1,719 billion. The CAGR in the past 7 years reached 14.93%. It is expected that the CAGR will remain stable at 14.91% in the next four years, and China's optical chip market is expected to expand to US$2,997 billion by 2026. Lightcounting predicts the 2023-2028 global optical module market CAGR of about 16%. According to Omdia's forecast, the overall market space for optical chips used in 25G and above optical modules will grow from US$1,356 billion to US$4.340 billion from 2019 to 2025, with a CAGR of 21.40%, and a broad industry space. According to ICC data, domestic optical chips with a rate of 2.5G and below accounted for more than 90% of the world in 2021, but the localization rate of optical chips above 25G is still about 5% lower. There is plenty of room for domestic alternatives, and the sales scale of Chinese optical chip manufacturers will continue to increase in the global optical chip market. In November 2021, the Ministry of Industry and Information Technology issued the “14th Five-Year Plan” for Information and Communications Industry Development, which requires the full deployment of next-generation communication network infrastructure; by the end of 2023, the number of Internet broadband access ports reached 1,136 million, an increase of 64.86 million over the previous year.
Among them, the number of optical fiber access (FTTH/O) ports reached 1,094 million, an increase of 69.15 million, accounting for 96.3% from 95.7% at the end of 2022; the number of 10G PON ports reached 2.32 million, an increase of 7.792 million, an annual increase of 51.2%, making it the world's largest in terms of network size and coverage.
The IDM model establishes technical barriers and creates the three core advantages of platform, cost, and performance. The company formed two major platforms, an “buried laser chip manufacturing platform” and a “ridge-guided laser chip manufacturing platform”, and accumulated eight major technologies, including “high-speed modulation laser chip technology” and “heterogeneous compound semiconductor material docking growth technology”, to optimize product performance and reduce product costs. From 2019 to 2023Q1-Q3, the company's R&D expenses were 116.19 million yuan, 15.705 million yuan, 18.494 million yuan, 27.92 million yuan, and 22.629 million yuan respectively, accounting for 14.29%, 6.73%, 7.97%, 9.58%, and 24.28% of revenue, respectively.
The company's 2.5G, 10G, and 25G chip products have all achieved a high level of technology, and the key core indicators have all reached or are superior to competitors in the same industry.
The product range is rich, and the deep layout CW light source benefits from silicon light. The company continues to enrich its product system, providing optical module manufacturers with full-band, multi-category products, and at the same time providing lower cost integrated solutions to achieve differentiated competition. According to C&C statistics, in 2020, the company ranked first in revenue among domestic manufacturers selling indium phosphide (InP) semiconductor laser chip products. Among them, the shipment volume of 10G and 25G laser chip series products ranked first among domestic companies in the same industry, and the shipment volume of 2.5G laser chip series products ranked first among domestic companies in the same industry. Self-developed 100G, 200G PAM4 EML laser chips, 50mW/70mW high-power silicon lasers, and 25/28G dual-rate data center CWDM DFB lasers are expected to break through overseas technology monopolies. The CW light source is the core key device of silicon optical modules, and the company's in-depth layout of CW light sources is expected to benefit from the increase in the application penetration rate of silicon optical modules.
Investment advice: The company focuses on R&D, design and production of high-speed semiconductor chips. The core technology is autonomous and controllable, and industry recognition is increasing year by year, benefiting from the high global high-speed digital communication market brought about by the demand for AI computing power.
At the same time, the company is deeply developing the CW light source field, which is expected to expand the room for incremental growth in the field of silicon optical modules.
We expect the company's revenue from 2023 to 2025 to be 1.44, 2.65, and 375 million yuan, up -49%, 83%, and 42% year on year, and net profit to mother of 0.19 million yuan, 70 million yuan, and 116 million yuan, up -81%, 272%, and 64% year-on-year. The corresponding PE is 707.8X/190.2X/115.7X, respectively. Covered for the first time, a “gain” rating was given.
Risk warning: Downstream market demand is insufficient, new product development progress is uncertain, customer certification progress is uncertain, and optical module technology evolution path is uncertain.