Incidents. On April 25, the company released its 2023 annual report. In 2023, the company achieved operating income of 47.622 billion yuan, a year-on-year increase of 2.49%, and net profit of 2.554 billion yuan, an increase of 35.77%; in 23Q4, the company achieved operating income of 12.52 billion yuan, an increase of 6.0% over the previous year, and realized net profit of 349 million yuan, an increase of 109.85% over the previous year.
23Q4 results were in line with expectations, and the improvement in earnings in the optical communications sector exceeded expectations. The company's 2023 results are in line with the previously announced forecast range. By business segment, in 2023, the company's optical communications sector achieved operating income of 7.369 billion yuan, a year-on-year decrease of 2.52%, revenue accounting for 15.5%, and a gross margin of 29.36%, an increase of 9.3 pct compared with the same period last year. The increase in the company's gross margin in the optical communication sector mainly benefited from further consolidating the core advantages of fiber cable technology and cost in the fiber optic cable production process, optimizing existing products and business structures, and at the same time speeding up the development and transformation efficiency of market results for high-end products and specialty products. In the smart grid sector, the company achieved revenue of 19.344 billion yuan, an increase of 10% over the previous year, accounting for 40.6% of revenue, and a gross margin of 13.57%; in the marine energy and communications sector, the company achieved operating income of 3.383 billion yuan, a year-on-year decrease of 24.57%, accounting for 7.1% of revenue, and a gross margin of 32.81%. In the industrial and new energy intelligent business segment, the company achieved revenue of 5.728 billion yuan, an increase of 14.41% over the previous year, accounting for 12.0% of revenue, and a gross margin of 15.13%. The 23Q4 company's rate for the period was 8.3%, an increase of 0.4 pct compared to the same period last year. The increase in the sales rate was mainly due to the increase in the current sales rate and financial rate. The increase in the sales rate was mainly due to the company's increased investment in market layout, and the increase in the financial rate was mainly due to an increase in interest expenses. The company's annual cash flow from operating activities reached 1,857 billion yuan, up 117.33% year on year. By the end of 2023, the company's accounts receivable and notes were 17.104 billion yuan, up 1.4% year on year, lower than the revenue growth rate, and the company's cash flow control was further improved.
Strengthen technical barriers in the field of optical communication, and continue to expand marine energy and communications businesses overseas. In the field of optical communication, the company increased the application of G654 marine fiber in marine communications and land backbone networks; investigated changes in market demand, used breakthroughs in the core process and equipment technology of large-core, low-loss, high-density optical cables to lay out the needs of next-generation high-capacity communication networks and quantum communication networks in advance; and continued to focus on the development and mass production of next-generation communication technologies such as multi-core optical fiber, small-mode optical fiber, air-core optical fiber, and doped optical fiber. In terms of the overseas layout of optical communication and power grids, the company has deployed the communication network industry in Europe, South America, South Asia, Africa, Southeast Asia and other countries and regions.
In 2024, the company will also continue to actively promote production capacity increases at overseas optical communication industry bases such as Egypt, Indonesia, and India, which have been in operation since 2022, and continue to improve the overseas localized production capacity layout. The company's marine communications undersea optical cable business will also usher in a period of rapid development. 99% of the world's international data is transmitted through submarine optical cables, and trans-ocean computing power transmission and overseas broadband demand are expected to accelerate the development of marine communications services.
Investment advice: We expect the company to achieve operating income of 569.83/670.32/78.909 billion yuan in 2024/2025/2026 and achieve net profit to mother of 30.29/40.31/5.119 billion yuan, corresponding to 11/8/7 times PE, and maintain the “recommended” rating.
Risk warning: The construction speed of offshore wind power projects in 2024 fell short of expectations, operators' fiber cable collection scale declined sharply, and medium- to long-term companies' overseas business layout fell short of expectations.