Incident: On April 12, the company released its 2023 annual report and 2024 quarterly report. The full year of 2023 achieved revenue of 755 million yuan, a year-on-year decrease of 16.46%, and realized net profit of 475.467 million yuan, a year-on-year decrease of 173.97%, and realized net profit deducted from non-return mother of 668.156 million yuan, a year-on-year decrease of 270.20%. 24Q1 achieved revenue of 198 million yuan, a year-on-year increase of 32.85%, and net profit to mother was 8.4432 million yuan, reversing losses.
Demand fluctuations & price reduction pressure put pressure on the 2023 results, turning losses into profits in 24Q1: Combined factors such as the macro environment and industry development in 2023 caused the company's related products to face fluctuations in demand and price pressure. At the same time, the increase in R&D expenses and the increase in accrued asset impairment losses & credit impairment losses also had a certain impact on profits, making the company's net profit for the full year of 2023 to -7.5467 million yuan. In 24Q1, the company's net profit from mother was 8.4432 million yuan, turning a loss into a profit. Looking at the revenue split in 2023, 1) optical chips and period products achieved revenue of 361 million yuan, a year-on-year decrease of 17.96%, a gross profit margin of 21.37%, a year-on-year decrease of 14.85pct; 2) indoor optical cable products achieved revenue of 192 million yuan, a year-on-year decrease of 12.72%, gross profit margin of 14.21%, a year-on-year increase of 0.25pct; 3) cable material product revenue of 185 million yuan, a year-on-year increase of 2.72 pcts. In 2023, we achieved a comprehensive gross margin of 18.64%, a year-on-year decrease of 6.57pct. 24Q1 ushered in marginal improvement, and the comprehensive gross margin increased to 24.13%.
Continuing to increase investment in R&D, focusing on new product breakthroughs in digital communication, telecommunications, etc., there is broad room for future growth: the company's R&D expenses for 21/22/23 were 9.79%/8.90%/12.73%, respectively. Of these, R&D expenses in 2023 were 96.027 million yuan, an increase of 19.51% over the previous year. Looking at R&D results, 1) Digital Communications: Representative achievements include developing AWG chips and components for 400G/800G optical modules in data centers; parallel optical components using 200G/400G/800G have been shipped domestically, and 1.6T product samples are being shipped; high-power DFB chips and devices equipped with silicon light have achieved small-batch sales and breakthroughs in performance indicators to achieve 200mW output at commercial temperature; MPO-FA products, used in 800G/1.6T optical modules; CPO & silicon optical solutions mode-field conversion FA Series products, coherent optical module solutions, polarization-maintaining fiber arrays enable small-batch shipment, etc. We believe that as AI demand continues to be high, the company's related products are expected to fully benefit; 2) Telecom: the backbone network 400G uses 40-channel 150GHz ultra-high-bandwidth AWG chips and modules to achieve small-batch supply; 1342nm EML+SOA chips used in 50G PON are being developed at an accelerated pace; anti-reflective 10G 1279nm DFB chips used in XGS PON achieve mass sales; develop small-size splitter chips for FTTR and achieve batch shipment; 3) LiDAR: The seed source DFB laser chip passed customer verification performance and began to be sold in small batches; at the same time, narrow linewidth laser chips and high saturated power SOA chips successfully used in FM continuous wave laser radars were developed.
Investment advice: We expect the company's net profit to be 0.45/0.82/122 million yuan respectively in 2024-2026. Refer to the closing price on April 12, 2024, and the corresponding PE multiples are 99X/54X/37X. The company gradually moved from “passive+active” to optoelectronic integration. Adhering to the IDM model, the company has outstanding technical strength. It continues to make breakthroughs in the field of optical chips/optical devices in the digital communication & telecom market, and has broad room for future growth. Maintain a “Recommended” rating.
Risk warning: Telecom/digital communication market demand falls short of expectations, competition intensifies, new product progress falls short of expectations