The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 144 million yuan (-48.96% YoY) and net profit to mother of 0.19 million yuan (-80.58% YoY). 24Q1 achieved revenue of 60 million yuan (+72.33%) and net profit to mother of 10 million yuan (-11.06% year over year).
Operating pressure is high in 2023. Telecom market revenue has declined sharply, mainly due to downstream customer inventory removal and a slowdown in terminal operator construction, and the accumulation of market competition has led to a decline in product prices. The sharp decline in data center business is mainly affected by the decline in demand in the traditional cloud computing field, waiting for new products to be released.
23Q4 revenue increased significantly from month to month, and 24Q1 revenue continued to rise. The company's month-on-month improvement in revenue for two consecutive quarters was mainly due to a recovery in industry demand and increased shipments of 10G EML products. Market competition is fierce, and product structure adjustments have put pressure on gross margins. The company's gross margin in 2023 was 41.88%, down 20.02pct year-on-year, mainly affected by price wars and product structure changes in the telecom market. Among them, the gross margin of 23Q3/23Q4/24Q1 was 39.1%/47.0%/34.8%, respectively. The month-on-month decline in gross margin in 24Q1 was also affected by the increase in production capacity during the climbing period. Personnel investment, hardware facility improvements, and equipment investment increased, and labor costs, depreciation, water and electricity costs increased in the short term. The sum of the four major expenses of 24Q1 was 12.17 million yuan, a slight increase over the previous year. The profit side decline was mainly affected by the year-on-year decline in gross margin and the reduction in government subsidies.
The 24Q2 CW light source has entered small batches. It is expected to achieve substantial growth in the second half of the year, and the 10G 1577nmeml volume is expected to accelerate in the second half of the year. 2024 is a key transformation year. The company is actively preparing, including purchasing new equipment and debugging, increasing epitaxial growth of large wafers, and continuously optimizing yield and processes. Investment in R&D has continued to be increased, and the results have been remarkable. 200G PAM4 EML product launch, comparable to leading international companies.
The 100mW high-power CW silicon laser is gradually being delivered to customers. In the PON product line, new 10GEML products began to contribute revenue, and 50G PON EML lasers and 25G PON EML are synchronized with international manufacturers. DFB laser products in the wireless product line have already been sampled or shipped.
Profit forecast: The company's net profit for 2024-2026 is expected to be 0.71/1.12/165 million yuan, corresponding PE is 183/117/79 times, respectively, maintaining a “buy” rating.
Risk warning: downstream demand falls short of expectations; market competition deteriorates; product prices fall sharply.