Incidents:
The company released its 2023 annual report. In 2023, the company achieved operating income of 13.353 billion yuan, a year-on-year decrease of 3.45%; realized net profit to mother of 1,297 billion yuan, an increase of 11.18% over the previous year.
Comment:
The fiber optic cable industry continues to develop. The “2023 Communications Industry Statistical Bulletin” issued by the Ministry of Industry and Information Technology indicates that in 2023, China's communications industry will make every effort to promote the construction of a network power and digital China, promote the deep integration of the digital economy and the real economy. The main operating indicators of the entire industry are growing steadily, network infrastructure such as 5G and gigabit optical networks is becoming more and more complete, the popularity of various applications is fully accelerated, and the high-quality development of the industry is progressing steadily. Optical fiber cables are an important infrastructure for mobile networks and fixed networks, and are also an integral part of the computing power network infrastructure for new applications such as cloud computing and artificial intelligence. According to data released by the Ministry of Industry and Information Technology, by the end of 2023, the total length of China's optical cables reached 64.32 million kilometers, a net increase of 4.74 million kilometers over 2022, an increase of about 8.0% over the previous year. We believe that the fiber optic cable industry is expected to continue to develop and drive industry growth.
The optical device and module industry has a broad market space. In the telecom market, global operators have upgraded to 10G PON and will continue to evolve to 50G PON in the future. According to Omdia's forecast, between 2024 and 2028, 50G PON port shipments will continue to increase and maintain a compound annual growth rate of 200%. By 2028, 50G PON will become the mainstream technology choice. In the data communication market, as global data center capital expenditure continues to grow at a high rate, demand for related optical transceiver modules and active optical cables is also expected to continue to grow. According to LightCounting's forecast, the total market size of silicon light-based optical device products will reach US$30 billion between 2021 and 2026.
The company's business segments continue to develop. In the prefabricated rod and optical fiber sector, on the one hand, the company ensures the profit level of mature products through efficiency improvement and process optimization, and on the other hand, continues to maintain R&D investment and marketing intensity for new products and technologies, and continuously optimizes the product structure. In the optical cable sector, the company further consolidated its leading position in the domestic market and improved the overseas production capacity layout. In the optical device and module sector, Bochuang Technology, a subsidiary of the company, completed integration with Changxinsheng, maintained its leading edge in the domestic telecommunications market, and continued to make progress in the field of high-speed optical modules used in the data center market.
Profit forecast, valuation and rating: The company's various business segments are expected to continue to benefit from the rapid development of the fiber optic cable, optical device and other industries. We raised the company's net profit forecast for 2024-2025 to 13.45/1,416 billion yuan, up 4.34%/5.36% from the previous time, and added the company's net profit forecast for 2026 to 1,491 billion yuan, corresponding to PE16/15/14X. We are optimistic about the prosperity of the fiber optic cable industry in the medium to long term, and maintain an “increase” rating.
Risk warning: risk of declining gross margin; risk of declining fiber optic cable boom.