We have been deeply involved in optical devices for more than 20 years and continue to lead the industry. The company is mainly engaged in R&D, production and sales of optoelectronic devices, modules and subsystem products. The products are mainly used in telecom optical communication networks and data center networks, and is the first optoelectronic device company listed in China. According to Guangxun Technology's 2023H1 semi-annual report, quoting industry agency data, the 2022Q2-2023Q1 company ranked fourth in the global optical device industry, and ranked 4th, 5th, and 3rd in the world in the three major market segments of telecommunications transmission, data communication, and access networks, respectively. According to Lightcounting's official website, the company has always been in the top ten global optical module manufacturers from 2016 to 2022. The company's shareholding structure is concentrated. Fenghuo Technology is the company's first controlling shareholder, holding 36.66% of the shares, and the State Council's State-owned Assets Administration Commission is the final actual controller.
The company's production capacity has been expanded many times, and the level of profit continues to rise. The company continues to promote the localization of optoelectronic devices, continuously optimize production technology, and adjust product structures. Since the public listing, it has raised funds four times to expand production capacity. It already has large-scale optoelectronic device manufacturing capabilities, and the company's business scale has grown rapidly. The company's revenue for 2018-2022 was $49.29 (+8.26%), 53.38 (+8.30%), 60.46 (+13.27%), 64.86 (7.28%), and 69.12 (6.56%) billion yuan, respectively, and net profit to mother was 3.33 (-0.47%), 3.58 (+7.51%), 4.87 (+36.25%), 5.67 (+16.39%), and 6.08 (+7.25%) billion yuan, respectively. The company's gross margins in 2018-2022 were 19.82%, 21.19%, 23.04%, 24.20% and 23.61%, respectively, and the profit level grew steadily.
Master the technical core of the industry and promote the localization of optical devices. As the world's leading R&D manufacturer of optoelectronic devices and modules, the company has led and participated in the formulation of 262 optical device industry and national standards, breaking the gap in China's optical device industry standards. In recent years, the company has continued to increase investment in R&D. In 2016-2022, the company's R&D cost CAGR reached 9.72%, achieving autonomy in key technologies for various optical device products such as optical amplifiers and wavelength selection switches. The company's share in the global optical device market has been growing steadily. According to Guangxun Technology's official website, the company has been the most competitive enterprise in optical devices and auxiliary equipment and raw materials in China for many years.
The industry is vertically integrated, and the product matrix covers a comprehensive range. The company has vertical integration capabilities from chips, devices, modules to subsystems, and has three major optoelectronic chip platforms: PLC, III-V, and SiP. At present, the company's 10G optical chips are basically fully self-supplied, 25G DFB optical chips are about 60% to 70% self-supplied, 25G VCSEL optical chips are basically self-supplied, and 50G EML optical chip development is basically completed. The company's high-speed optical module business has a first-mover advantage. 400G optical modules have been delivered in batches, and 800G optical modules have been delivered and orders have been received one after another. We believe that as one of the few domestic enterprises with the ability to independently develop optical chips, Guangxun Technology's products cover all segments of optical modules, have obvious cost advantages and profit margins, and are expected to achieve continuous growth in the company's performance.
Profit forecasting and valuation. We believe that as AIGC boosts demand for high-speed optical modules at home and abroad, and the telecom and traditional digital communication industries come to an end, the optical communications industry is expected to maintain rapid long-term development. Guangxun Technology is in a leading position in industry competition, and the business is expected to maintain steady growth. We expect the company's net profit to be 591, 803, and 1,062 million yuan respectively in 2023-2025, and EPS of 0.74 yuan, 1.01 yuan, and 1.34 yuan. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given a 2024 PE range of 40-45X, corresponding to a reasonable value range of 40.40-45.45 yuan, which is “superior to the market” rating.
Risk warning. Demand from overseas markets fell short of expectations, market competition exceeded expectations, trade frictions intensified, etc.