Incident: The company released its 2024 quarterly report, achieving revenue of 220 million yuan, up 17.5% year on year, down 14.7% month on month, and net profit to mother of 31.75 million yuan, up 10.8% year on year and 36.8% month on month.
The company's overall performance in the first quarter was in line with expectations. There was no clear inflection point from month to month, and we are waiting for changes in AI demand.
Q1 The overall operation is steady, and we are waiting for an inflection point to occur. Judging from the company's situation in the first quarter, revenue and profit all achieved year-on-year growth, but the month-on-month period did not show a trend among leading optical module manufacturers. We judge that the pace of products related to optical fiber connectors is relatively lagging behind. Furthermore, it also has a certain relationship with the company's procurement pace for major overseas customers and product progress for new customers. However, as the upstream device sector is tight, the company's MT plug-in products and MPO products are expected to benefit. Combined with the increase in capital expenses of leading overseas cloud vendors, overall demand is expected to be released, and the company's subsequent order revenue is expected to change, waiting for an inflection point to appear.
Focusing on optical connectivity for decades, focusing on domestic and foreign optical connectivity needs. The company has been working in the field of optical communication for many years. Based on ceramic inserts, PLC wafers and chips, the company has successively developed optical-passive products including high-density optical fiber connectors, conventional optical fiber connectors, wavelength division multiplexers, PLC optical splitters, integrated function modules, etc., and has gradually expanded optical active products such as optical fiber modules, AOC, and DAC. Based on FBG technology, a series of FBG sensors and sensor monitoring systems for temperature, strain, pressure, displacement, vibration, etc. have been developed, which are widely used in various bridge engineering application scenarios. The company's category expansion is progressing well, and downstream product application fields continue to open up, which will lay the foundation for the company's future growth.
AI opens up market space for optical connectivity, and the company is expected to accumulate and grow. The company's main products are optical devices such as optical fiber connectors, which are supplied to North American cloud vendors for data center construction. With the advent of AI, the demand level of optical connectivity and market space have increased along with the upgrading of communications. The company has a rich range of optical connectivity products, excellent technical indicators, high product yield stability, and a good reputation in the North American market. Driven by AI, overseas technology companies are deploying one after another, and capital expenditure is rising. Demand from the company's traditional major overseas customers is expected to continue to rise, the progress of potential new customers is expected to accelerate, and the company is expected to usher in an AI era of accumulation and underdevelopment.
Investment advice: The company's performance in 2023 is relatively lackluster, mainly because AI demand has not yet been released, while traditional cloud computing has recovered to a certain extent due to customer adjustments. Entering 2024, as overseas tech giants increase AI one after another, demand related to optical connectivity will be definitively released. We will adjust the company's 2024-2026 profit forecast based on the company's 2023 performance and current industry background. The company's net profit for 2024-2026 is estimated to be 2.5/3.3/40 billion yuan, respectively, corresponding to 2024-2026 PE 35.6/26.9/22.3 times, respectively. The AI era company is expected to accumulate wealth and maintain a “buy” rating.
Risk warning: New product expansion falls short of expectations; market competition intensifies.