Changguang Huaxin focuses on the semiconductor laser field. Its main products include high-power single tubes, high-power bars, high-efficiency VCSELs, and optical communication chips, forming four major product matrices composed of semiconductor laser chips, devices, modules, and direct semiconductor lasers. Products are used in: optical pump lasers such as fiber lasers, solid-state lasers and ultrafast lasers, direct semiconductor laser output processing applications, intelligent laser manufacturing equipment, national strategic high technology, scientific research, medical beauty, laser radar, machine vision positioning, intelligent security, consumer electronics, 3D sensing and imaging, face recognition and biosensing.

The company has built a complete process platform and mass production line from chip design, MOCVD, lithography, decomposing/coating, packaging testing, optical fiber coupling, etc., and is one of the few companies in the world that develops and mass-produces high-power semiconductor laser chips. The company's high-brightness single-tube chips and products such as optical fiber coupling output modules, high-power bars and stacked arrays have repeatedly made breakthroughs in power, brightness, photoelectric conversion efficiency, and longevity, and are in sync with the world's advanced level. With the accumulation of technology in the field of high-power semiconductor laser chips, the company has built three major material systems: GaAs, InP, and GaN, established two major process technologies and manufacturing platforms for edge emission and surface emission, extended the vertical development of downstream products such as devices, modules, and direct semiconductor lasers; and horizontally expanded the field of VCSEL and optical communication laser chips.

R&D investment helps the company grow. The company's ultra-high power single-tube chip has made breakthrough progress in structural design and development technology. The single-tube chip developed has a continuous power of more than 100W at room temperature (500 μm chip width) and a working efficiency of 62%. It is the record for the highest level of single-tube chip power reported so far, opening a new era of 100-watt single-tube chips. The company lays out VCSEL laser chips for automotive radar, automotive EEL edge emitting lasers, and pump sources for 1550nm fiber lasers to consolidate Changguang Huaxin's market position as a complete lidar light source solution provider. In the future, VCSEL will usher in more applications, such as eye tracking, speed monitoring, and PM2.5 air quality monitoring. The company launched single-wave 100GEML (56GbDEml modulated by PAM4), 50GVCSEL (25GVCSEL modulated by PAM4), and 100mWCWDFB high-power optical communication laser chips. The company's optical communication products are the core components of the current 400G/800G supercomputing data center interconnect optical modules.

The buyback shows the company's confidence in stock prices. On August 22, 2024, the company announced that it has completed the share repurchase of 1 million shares, with a maximum transaction price of 39.21 yuan/share and a minimum transaction price of 25.59 yuan/share. Buybacks are mainly used for employee stock ownership plans or equity incentives, demonstrating the company's confidence in its long-term development.

Investment advice: Considering that the recovery in the company's downstream demand falls short of expectations, we lowered the company's net profit forecast for 24/25 to 0.031/0.058 billion yuan (a reduction of 78%/72%), and the net profit forecast for the new 26 years to 0.076 billion yuan, corresponding to the current PE valuation of 145X/78X/60X. Considering that the company is a leading domestic high-power semiconductor laser chip enterprise, semiconductor laser chips such as VCSEL chips and optical communication chips, as well as the three major material systems of GaAs, InP, and GaN, are expected to open up new growth space for the company and maintain the “gain” rating in the future.

Risk warning: Downstream demand falls short of expected risk; new product development or customer introduction progress falls short of expected risk; industry competition increases risk.