Core views

The company expects net profit to be 0.81 billion yuan to 0.95 billion yuan in the first half of the year, up 181%-229% year on year; according to the median forecast, the company's 24H1 net profit to mother will be 0.88 billion yuan, up 205% year on year and 120% month on month. The AI industry is developing rapidly, and the demand for network hardware performance is high. Network bandwidth can effectively improve data transmission efficiency, thereby significantly improving the computing power level of computing power clusters. Therefore, demand for high-speed optical modules such as 400G/800G/ 1.6T remains strong. As a leading manufacturer in the global high-speed optical module industry, the company maintains deep ties with overseas technology giant customers, and at the same time continues to develop new customers. The overseas production capacity layout is progressing smoothly. The company's high-speed products such as 800G and 1.6T are progressing smoothly, and are expected to gain more market share and achieve rapid growth in performance.

occurrences

The company released its 2024 semi-annual performance forecast. In the first half of 2024, the company expects to achieve net profit of 2.15-2.5 billion yuan, +250.3%-307.33% year-on-year, and is expected to achieve net profit of 2.1-2.45 billion yuan after deduction, or +260.13% -320.15% year-on-year.

Brief review

1. The performance growth rate is relatively fast, customer side development continues to break through, and overseas production capacity layout is smooth.

The company released the 2024 interim report forecast. The net profit for the first half of the year is expected to be 0.81 billion yuan - 9.0.5 billion yuan, up 181%-229% year on year. According to the median forecast, the company's 24H1 net profit to mother is 0.88 billion yuan, up 205% year on year and 120% month on month. According to the single quarter, net profit for 24Q2 is expected to be 0.485 billion yuan to 0.625 billion yuan, up 169%-246% year on year, 50%-93% month on month. The median forecast is 0.555 billion yuan, up 208% year on year and 71% month on month.

We believe that the AI industry is developing rapidly, has a high level of prosperity, requires high network hardware performance, and network bandwidth can effectively improve data transmission efficiency, thereby significantly improving the computing power level of computing power clusters. Therefore, demand for high-speed optical modules such as 400G/800G/1.6T remains strong. As a leading manufacturer in the global high-speed optical module industry, the company maintains deep ties with overseas technology giant customers, and at the same time continues to develop new customers. The overseas production capacity layout is progressing smoothly. The company's high-speed products such as 800G and 1.6T are progressing smoothly, and are expected to gain more market share and achieve rapid growth in performance.

2. Demand for 800G continues to exceed expectations, and demand for 1.6T is expected to be released quickly.

AI infrastructure construction is in full swing, demand for network hardware remains strong, and Cape X's share is expected to increase further. Demand for 800G will continue to improve next year, exceeding market expectations, and leading optical module companies are expected to fully benefit. With the gradual release of Nvidia's Blackwell GPU production capacity, the demand for network hardware such as the supporting 1.6T optical module is expected to increase rapidly. At the same time, according to the pace of Nvidia upgrading GPUs and network hardware in 1-2 years, the pace of shipment of 3.2T optical modules is also expected to accelerate significantly. The company's 800G products are progressing smoothly and are expected to be rapidly released. The 1.6T optical module has strong competitiveness and is expected to gain a high market share. At the same time, in overseas markets, the company has entered the supply chain system of many major overseas manufacturers. As customer needs gradually come to fruition, the company is expected to benefit the core.

3. Profit forecast and investment advice: The company is the world's leading optical module manufacturer. It has achieved breakthroughs in the 400G era and is in a leading position in market share. As demand for 800G optical modules grows, the company is expected to ship from small batches to batches, and the company's breakthrough in 1.6T optical modules is expected, and the company is expected to continue to gain a leading edge. At the same time, the company is also expected to continue to make new progress in developing new customers, which will support the company's growth. The company's profitability is strong, and its performance is expected to grow rapidly as revenue continues to increase. The rapid development of AIGC will drive demand for high-speed optical modules, and the company is expected to benefit. We expect the company's revenue for 2024-2026 to be 6.762 billion yuan, 10.799 billion yuan, and 14.037 billion yuan, respectively, and net profit to mother will be 2.003 billion yuan, 3.169 billion yuan, and 4.108 billion yuan respectively. The current market value corresponds to PE 39X, 24X, and 19X, maintaining a “buy” rating.

Risk analysis

The progress of the company's 800G and 1.6T optical modules falls short of expectations; there is great uncertainty in the North American macro environment, and there is a risk that the capital expenditure of cloud vendors will fall short of expectations; the accumulation of midstream competition in the optical communications industry, if competition intensifies, will have a great impact on the price of optical modules; many chips are used in optical modules, including electronic chips, optical chips, etc., and the lack of cores will affect the normal delivery of the company's optical module products; the company currently continues to expand new customers in North America to get more orders. If the product does not pass customer certification, the performance will lack new performance Growth points; AIGC is developing slowly, and there is a risk that demand for optical modules will fall short of expectations; changes in the international environment affect the supply chain.