Incident: The company released its 2024 quarterly report. In 24Q1, the company achieved revenue of 730 million yuan, a year-on-year increase of 155%, and realized net profit of 280 million yuan to mother, an increase of 203 percent over the previous year, and realized net profit without return to mother 270 million yuan, an increase of 215% over the previous year.
24Q1's performance was stable month-on-month. The main reason was that during the Spring Festival, production capacity for optical passive devices was scarce, which is expected to ease after the Spring Festival; in addition, equity incentive expenses also had an impact on net profit:
24Q1 revenue was basically the same as 23Q4 revenue (23Q4 revenue of 730 million), and net profit declined slightly (23Q4 net profit of 290 million yuan). According to the company's public exchange of information, mainly due to the company's passive device business characteristics, production capacity is somewhat dependent on skilled workers. The mobility of production personnel around the Spring Festival has increased compared to normal. At the same time, the proficiency and efficiency of newly recruited employees after the Spring Festival requires a gradual improvement process, so there is a phased shortage of production capacity. Currently, the shortage of personnel and production capacity problems have been clearly mitigated. We believe that with the successive arrival of newly recruited workers and the gradual increase in skill proficiency after the Spring Festival, the company's shortage of production capacity for passive devices is expected to be alleviated;
The company issued a restricted stock incentive plan in 2023 and accrued expenses in 2024. According to the company's relevant announcement, the company's estimated equity incentive accrual expenses in 2024 are 82.4 million yuan (assuming an average value of 20.6 million yuan per quarter), which is expected to have an impact on the net profit for each quarter.
Improve inventory management capabilities and focus on business quality. By the end of the first quarter, the company's inventory was 2.3 billion yuan, down from 2.6 billion yuan at the end of the previous year. Mainly, while growing its business, the company focused on improving business quality and long-term healthy development, and improving operational turnover capacity through continuous and effective management of inventory.
Production capacity construction is being actively promoted, and the Thai plant will soon be put into operation. According to public information, the first phase of the production base plant built by the company in Thailand is expected to begin trial production in May of this year. Currently, many employees in Thailand are responsible for early infrastructure and decoration on site. After the plant is delivered and put into operation, it is planned to send some employees from production bases in Suzhou, Jiangxi, and Shenzhen to simultaneously recruit local employees in Thailand. We believe that with the gradual advancement of the company's production capacity and the increase in demand for high-speed optical devices due to the development of superimposed AI, the company's overall revenue scale is expected to continue to expand. In particular, shipments of products such as high-speed optical devices are expected to accelerate after the company is put into production at its base in Thailand.
Investment advice: We expect the company's 2024-2026 revenue to be 38/58/74 billion yuan, respectively, and net profit to mother of 14/20/26 billion yuan, respectively. The current stock price corresponds to PE 42/29/23 times, respectively. Considering the boom in optical communications brought about by AI, we maintain a “buy” rating.
Risk warning: AICG development falls short of expectations; demand for computing power falls short of expectations; risk of market competition.