Description of the event

The company released its 2024 quarterly report. During the reporting period, the company achieved operating income of 5,059 billion yuan, an increase of 0.85% over the previous year; achieved net profit of 41 million yuan, an increase of 10.93% over the previous year; and realized net profit of 42 million yuan without return to mother, an increase of 10.34% over the previous year.

Incident comments

In the main field of optical communication, we have a relatively complete industrial chain from optical fibers, optical cables, chips to system equipment. The company has mastered independent optical fiber prefabricated rods and optical fiber core processes. In the field of special optical fibers, new optical fiber products and technology are applied in aerospace, marine, nuclear power and other fields, leading the market share in the market segment. In the field of optical transmission and optical access system equipment, we cooperated with operators to carry out 400GC+L multi-band ultra-long-distance transmission system verification. The total length of 3820KM ultra-long distance optical transmission from Shanghai to Guangzhou was completed in 23, with no electricity relay throughout the process, achieving the longest verification distance in the current network in the industry. In the field of chips, self-developed 400G coherent optical modules and supporting self-developed integrated devices, chips, T-class optical transmission chips, FTTR1G to 10G solutions, etc., master advanced process design and core IP self-development capabilities of core devices, and adhere to the path from self-development to leading core technology mastery.

In the field of optical network equipment, the company released the smart optical network LIGHTS solution and innovated in multiple dimensions.

In terms of the development of the marine optical communication industry, the company is targeting new business growth poles and increasing resource investment. The company has built a sea-optical cable production base, and has full business capabilities for submarine cables, marine optical communication equipment, engineering design and construction to provide customers with EPC turnkey services. From sea cables, wet end equipment, and shore end equipment to management, operation and maintenance software platforms, FitOcean marine network solutions have achieved a full range of self-research and have been initially used in domestic and international cross-sea communication and marine monitoring networks.

At the industry level, computing power networks have achieved a phased leap forward. The National East Digital and Western Computing Strategy continues to be implemented, and the layout of the national computing power network continues to be improved. By the end of 2023, the three basic telecommunications companies provided 970,000 data center racks to the public, a net increase of 152,000 over the end of the previous year, and the amount of public infrastructure computing power that can be provided to the outside world exceeds 26 eFlops. Start the construction of a large-scale intelligent computing center and continuously optimize the computing power supply structure. Adapt to development trends such as cross-network computing power scheduling and diversification of carrying requirements to create an all-optical base for computing power network integration and cloud network integration; build about 130 trunk optical cables around the layout of national computing power hubs and data center clusters, and launch the construction of a 400G all-optical interprovincial backbone network to achieve efficient interconnection between cloud and computing power networks.

Computing and storage is a growing business that the company has focused on building in recent years. It seizes strategic opportunities for the development of computing power. In recent years, the compound annual growth rate has reached more than 50%. In terms of product technology, based on more than 20 years of deep experience in the communications field, the company has collaborated extensively with the industry's most advanced suppliers to take the lead in releasing diverse computing power products and technologies such as X86 and ARM to achieve the systematic layout and commercialization of basic computing power hardware. Launched a series of self-developed server products, completed technological breakthroughs in the entire chain of high-end liquid-cooled servers, commercialized self-developed high-end liquid-cooled servers, and reached the leading level of cold plate liquid cooling ratio in the industry. Deepen cooperation with industry-leading partners in the field of intelligent computing to provide computing power infrastructure for the development of AI. In the field of marketing, while continuing to deepen close cooperation with operator customers, we invest resources to cultivate high-value customers such as government enterprises, finance, and electricity.

Profit forecast and investment suggestions: Dragons are circling, deepening the main optical communication industry, and developing computing and storage businesses. Changjiang Computing, a subsidiary of Fiberfire Communications, is an important operator server supplier. It is expected that its market share in the operator market will continue to rise, which may open up room for the company's revenue and profit growth. The company's net profit for 2024-2026 is estimated to be 711, 10.22, and 1,524 million yuan, up 41%, 44%, and 49% year-on-year, corresponding to PE 29x, 20x, and 14x. It is recommended and maintains a “buy” rating.

Risk warning

1. Carrier transmission network Capex falls short of expectations;

2. The competitive landscape of the industry has deteriorated.