Incidents:
On March 22, 2024, the company released its 2023 annual report: annual revenue of 1,675 billion yuan, a year-on-year decrease of 0.57%; net profit to mother was 81 million yuan, a year-on-year decrease of 59.49%.
Revenue restructuring, data communication business increased significantly
In 2023, the company's telecom market business achieved revenue of 110 billion yuan, a year-on-year decrease of 24.45%, mainly affected by the intensification of industry cycles and market price competition; the company's data communications, consumer and industrial connectivity markets achieved revenue of 572 million yuan, an increase of 153.06% year-on-year, mainly due to increased market share and customer demand.
The silicon light market space is broad, and the company's related products are progressing steadily
According to LightCounting's forecast, the market share of silicon light-based optical device products will rise from 24% in 2022 to 44% in 2028. The company has achieved mass production and shipment of 400G-DR4 silicon optical modules based on silicon photonic technology, and is developing next-generation silicon optical modules for data centers. It is expected that with the gradual completion of the company's “technical improvement project with an annual output of 2.45 million silicon transceiver modules”, silicon light products are expected to expand.
The company's 800G high-speed copper cable has delivered samples to customers
According to LightCounting forecasts, the high-speed cable market will more than double in size within the next five years, reaching $2.8 billion by 2028. The CAGR of DAC (passive copper cable) sales is expected to be 25% from 2024 to 2028. The company has completed the development of 800G copper cable products used in data communication and has delivered samples to customers.
Changxinsheng Holdings enters the consumer and industrial connectivity markets
By holding Changxinsheng, the company further integrates the existing telecom market business, improves the digital communication market business, and enters the consumer and industrial connectivity markets. Changxinsheng's Hanchuan factory was officially put into operation in mid-2023; Changxinsheng's Indonesian plant, which serves overseas customers, was tested in early 2024 and passed customer certification.
Profit Forecasts, Valuations, and Ratings
Considering the gradual completion of the company's production line, R&D investment is high. We expect revenue for 2024-2026 to be 20.94/25.85/3.196 billion yuan respectively, with year-on-year growth rates of 25.01%/23.44%/23.62%; 2024-2026 net profit to mother of 1.63/1.89/224 million, respectively, with year-on-year growth rates of 100.28%/15.89%/18.20%; EPS of 0.57/0.66/0.78 yuan/share, respectively, and a 3-year CAGR of 39.99%. We believe that the construction of the domestic operator backbone network and computing power network in 2024 will help improve the company's performance. At the same time, we are optimistic about verifying the company's silicon and copper cable products and reaching their growth potential after delivery, and we recommend continuing to pay attention.
Risk warning: Product demand falls short of expected risk; silicon light industry development falls short of expected risk; copper cable industry development falls short of expected risk; industry competition increases risk.