Incident: The company released its 2023 annual report and 2024 quarterly report on the evening of April 25. In 2023, it achieved revenue of 6.061 billion yuan, down 12.31% year on year; gross profit margin of 22.63%, up 0.59pct year on year; realized net profit of 619 million yuan, up 1.80% year on year; net profit without return to mother was 565 million yuan, up 3.45% year on year. The revenue side of the year declined, and the profit side grew steadily.
Comment: In the first quarter of 2024, the revenue side recovered steadily, and the profit side declined; R&D investment continued to increase high-speed optoelectronic chips and 800G/1.6T high-speed optical module products. On a quarterly basis, in the first quarter of 2024, the company achieved revenue of 1,291 billion yuan, up 1.79% year on year; gross profit margin of 22.53%, up 0.49 pct year on year; realized net profit of 77 million yuan, down 24.21% year on year; realized net profit without return to mother of 73 million yuan, down 5.15% year on year. In terms of R&D investment, the company invested 603 million yuan in R&D throughout 2023. The main investment includes 100G PAM4 lasers, detectors, optoelectronic chips such as thin-film lithium niobate, and new products such as 400G/800G/1.6T high-speed optical modules.
The company's transmission products business declined slightly in stages due to downstream demand for telecommunication equipment and the slowdown in infrastructure construction, and continued to strengthen large-scale manufacturing capabilities and expand new business areas. The company's transmission business achieved revenue of 3.344 billion yuan in 2023, down 8.55% year on year; gross profit margin was 29.56%, down 0.78 pct year on year, mainly due to a slowdown in the growth rate of global telecom equipment demand in the downstream telecom market, a slowdown in the growth rate of mobile networks and optical transmission markets, and a slowdown in the pace of 5G construction by domestic operators.
As the domestic optical transmission market starts commercial use of 400G trunk networks at the end of 2023, China Mobile will launch an inter-provincial backbone transmission network 400G OTN test network equipment collection project in November 2023. It is expected that downstream demand for the company's transmission business will pick up in 2024.
Revenue from the company's data and access business declined in 2023 due to a slowdown in data center demand, and is expected to pick up in 2024 driven by AI. In 2023, the company's data and access business achieved revenue of 2,664 billion yuan, a year-on-year decrease of 17.01%; gross profit margin was 13.04%, a year-on-year decrease of 2.39%. Driven by the recovery in capital expenditure of overseas cloud computing vendors, the company's business is expected to pick up in 2024.
Profit forecast and investment suggestions: Guangxun Technology is a leading enterprise with scarce chip self-research capabilities in the domestic optoelectronic device field. We are optimistic that the company will benefit from the construction of data centers in East Digital and Western Computing and the continuous increase in demand brought about by the AIGC era to achieve rapid growth in performance. The company is expected to generate revenue of 78.41/96.97/11.672 billion yuan in 2024-2026, achieving net profit of 8.17/10.05/1,220 million yuan, corresponding to EPS 1.03/1.27/1.54 yuan/share. It is covered for the first time and gives a “buy” rating.
Risk warning: Digital communication and telecom market demand falls short of expectations, customer growth falls short of expectations.