Incidents:
On April 25, 2024, the company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 6.061 billion yuan, down 12.31% year on year; net profit to mother of 619 million yuan, up 1.80% year on year; net profit after deducting non-return to mother of 565 million yuan, up 3.45% year on year; and basic earnings per share of 0.83 yuan/share. With 2024Q1, the company achieved operating income of 1,291 billion yuan, a year-on-year increase of 1.79%; net profit to mother of 77 million yuan, a year-on-year decrease of 24.21%; net profit after deducting non-return to mother of 73 million yuan, a year-on-year decrease of 5.15%; and basic earnings per share of 0.10 yuan/share.
The market share is leading in the world, and the product coverage is comprehensive
According to Omdia's data, from 2022/Q4 to 2023Q3, the company's share of the global optical device market was 6.30%, ranking fourth in the world. In terms of market segments, the company ranked 4/5/3 in the world in the three segments of telecom transmission networks, data centers, and access networks, respectively. The company has vertical integration capabilities from chips, devices, modules to subsystems. Among them, data center optical modules cover speeds such as 100Gb/s, 200Gb/s, 400Gb/s, and 800Gb/s. The company's product matrix is expected to benefit from the demand for 400G and 800G optical modules brought about by the AI industry, as well as the data center connectivity requirements required for large-scale commercial deployment of AI.
Maintain high R&D investment and forward-looking layout in multiple fields
The company's R&D expenditure rate reached 11.52% in 2024Q1, up 0.87 pct year on year and 2.89 pct month on month.
The company has a layout in 400G backbone networks, 5G-A, 25G/50G PON, AI clusters 1.6T and 3.2T high-speed connections, smart cars, and satellite communication applications, and has the ability to provide corresponding optical device products.
Profit Forecasts, Valuations, and Ratings
Considering the company's high product market share, which is expected to benefit from the AI industry's demand for high-speed optical modules, we have raised the company's revenue forecast for 2024 and 2025. We expect the company's 2024-2026 revenue to be 74.40/87.67/ 10.084 billion yuan, respectively, with year-on-year growth rates of 22.75%/17.84%/15.03%; net profit to mother of 7.04/8.19/ 927 million yuan, respectively, with year-on-year growth rates of 13.67%/16.35%/13.23%; EPS of 0.89/1.03/1.17 yuan/share, respectively, and a 3-year CAGR of 14.41%. Since the company can already provide 400G, 800G, and 400G ZR optical modules, it is expected to benefit from the growing demand for AI computing power. It is recommended that domestic operators start 400G OTN construction, and continue to pay attention.
Risk warning: Digital communication market growth falls short of expected risk, optoelectronic chip supply chain risk, market competition intensifies risk.