Introduction to this report:
The profit forecast was updated, the target price was raised, and the increase rating was maintained; performance fell short of expectations, R&D investment increased dramatically; demand for high-speed optical communication is strong, and the Thai factory is expected to reach production in the second half of the year.
Key points of investment:
Update profit forecasts, raise target prices, and maintain an increase in holdings rating. The 2023 performance fell short of our expectations. Therefore, the net profit attributable to the parent company for 2024-2026 was 1.23 (-7.8%) /1.75 (-10.98%) /210 million yuan, corresponding to EPS of 0.49/0.70/0.84 yuan. Considering that the thin-film lithium niobate chip developed by the company is expected to replace domestic production in the field of high-speed modulators and achieve higher profit flexibility, we gave it 80x in 2025, raised the target price to 56 yuan (previous value 54 yuan), and maintained an increase in holdings rating.
Performance fell short of expectations, and R&D investment increased dramatically. Revenue for the full year of 2023 was 709 million yuan, up 10.50% year on year; net profit to mother was 60 million yuan, down 49.38% year on year. From an industry perspective, the European geopolitical conflict in 2023 affected the operation of the Milan Optical Depot. At the same time, demand in the domestic communications market and industrial laser market was insufficient, leading to intense price competition and a decline in gross margin.
Furthermore, the company is increasing its investment in new products such as thin-film lithium niobate chips and autonomous driving lidars, while the new products are still in the customer verification and small batch stages, so profit levels are under pressure.
Demand for high-speed optical communication is strong, and the Thai plant is expected to reach production in the second half of the year. Since 2023, demand for optical modules, mainly 400G/800G, has grown rapidly, driving the company's gross margin of optical communication devices business from 39% to 45%. We expect that from Q2 2024, domestic demand for 400G will also increase dramatically, which is expected to drive a further increase in high-end optical device shipments. In addition, considering that customers such as optical communications and industrial lasers come from overseas, or domestic customers are going overseas one after another, the company's Thai factory will reach production in the second half of the year, which is expected to better explore overseas markets.
Catalysts: Demand volume for thin-film lithium niobate; high speed optical devices drive revenue growth.
Risk warning: lidar business development falls short of expectations; competition for industrial laser devices intensifies