Incident: The company released its 2023 annual report and 2024 quarterly report on the evening of April 22. In 2023, the company achieved revenue of 3,098 billion yuan, a year-on-year decrease of 6.43%; gross profit margin of 30.99%, a year-on-year decrease of 5.67pct; realized net profit of 688 million yuan, a year-on-year decrease of 13.54%; realized net profit without return to mother of 678 million yuan, a year-on-year decrease of 13.54%.
Comment: In the first quarter of 2024, both revenue and profit achieved rapid growth, gross margin continued to rise, AI computing power demand and related capital expenses rapidly increased, and the company's demand for high-speed optical modules increased significantly. On a quarterly basis, in the first quarter of 2024, the company achieved revenue of 1,113 billion yuan, up 85.41% year on year; gross profit margin of 42.00%, up 7.96 pct year on year; realized net profit of 325 million yuan, up 200.96% year on year; realized net profit without return to mother of 325 million yuan, an increase of 206.69% year on year. The company's performance-side revenue and net profit declined year-on-year in 2023, mainly due to the impact of the phased slowdown in industry demand on the telecom side and the decline in gross margin due to falling prices of some products in the digital communication side market.
The first phase of the company's overseas factory in Thailand has been officially put into operation; it has increased investment in the development of new silicon optical modules and LPO optical module products. During the reporting period, the first phase of the company's factory in Thailand was officially put into operation. Currently, the second phase of the Thai factory is being accelerated and is expected to be completed and put into operation within 2024. In terms of R&D investment, the company invested 134 million yuan in R&D in 2023, and has made many advances in new product fields such as high-speed optical modules, silicon optical modules, and LPO optical modules. During the reporting period, the company continued to optimize and improve the process flow, improve production automation coverage, and further promote lean production management, so that the company can respond flexibly to production efficiency management of multiple varieties, small batches, and short delivery times, and shorten the production cycle.
The acquisition of Alpine lays out silicon optical technology and lays out a strategic position for global optical communication silicon optical modules.
Alpine focuses on silicon photonics, PAM4, and coherent optical technology. Future silicon optical modules may rapidly increase penetration rates through cost advantages. The company completed the acquisition of the remaining shares in Alpine within 2023, and achieved 100% control, which helps the company achieve technology integration and industrial complementarity, enhance its competitive advantage in silicon optical module technology routes, and seize strategic opportunities in upgrading global optical modules to silicon optical technology.
Profit forecast: As an industry-leading manufacturer of high-speed optical modules, we are optimistic that the company will benefit from the demand for high-end optical modules brought by AIGC, and that silicon optical modules are expected to achieve rapid release as production equipment and materials gradually arrive in the next generation of technology upgrades. The company is expected to achieve operating income of 44.81/56.40/6.933 billion yuan in 2024-2026, and achieve net profit of 10.23/14.05/1,743 billion yuan, corresponding to EPS of 1.44/1.98/2.45 yuan, maintaining a “buy” rating.
Risk warning: Demand from the digital communication and telecom side falls short of expectations, and business development falls short of the expected risk.