occurrences

The company released its 2024 semi-annual report. During the reporting period, it achieved operating income of 10.799 billion yuan, an increase of 169.70% year on year; net profit to mother of 2.358 billion yuan, up 284.26% year on year; net profit after deducting non-return to mother of 2.333 billion yuan, an increase of 300.07% year on year. Among them, 2024Q2 achieved operating income of 5.956 billion yuan, up 174.88% year on year and 22.99% month on month; net profit to mother of 1.349 billion yuan, up 270.82% year on year, up 33.68% month on month; net profit after deducting non-return to mother of 1.343 billion yuan, up 283.05% year on year and 35.60% month on month.

Gross margin has increased steadily, and the results of cost reduction and efficiency are obvious

The company's 2024H1 gross margin reached 33.13%, up 2.74 pcts year on year; net margin reached 22.29%, up 6.13 pct year on year. The company's expense ratio declined significantly during the 2024H1 period. The management expense ratio was 2.84%, down 1.83 pcts year on year; sales expenses ratio was 0.83%, down 0.26 pct year on year.

The share of high-end product shipments has increased, and the 1.6T optical module 2024Q4 is expected to be delivered to the company's key customers to further increase investment in computing power infrastructure. Demand for 400G/800G optical modules will increase significantly, and the iteration of optical modules to 800G and above will accelerate the iteration of optical modules to 800G and above. Thanks to the rapid growth in the share of high-end products such as 800G/400G shipments, continuous optimization of the product structure, and cost reduction and efficiency, the company's operating income and net profit have increased dramatically.

According to the “Zhongji Innotech Investor Relations Record Form 20240805” released by the company on August 6, 2024, the company's 1.6T optical modules are expected to be delivered in 2024Q4 and will be increased one after another in 2025.

Fund-raising projects continue to advance

The company continues to promote fund-raising projects such as the “Suzhou Xuchuang Optical Module Business Headquarters and R&D Center Construction Project” and the “Tongling Xuchuang High-end Optical Module Production Base Project”. Among them, the “Tongling Xuchuang High-end Optical Module Production Base Project” has been implemented and completed.

High performance growth, continuous expansion of high-end products, maintaining the “purchase” rating. We expect the company's revenue for 2024-2026 to be 25.595/37.956/49.107 billion yuan, with year-on-year growth rates of 138.80%/48.30%/29.38% respectively; net profit to mother is 5.165/8.114/10.447 billion yuan, respectively, with year-on-year growth rates of 137.65%/57.08%/28.75%, and 3-year CAGR of 68.76%; EPS 4.61/7.24/9.32 yuan/share, respectively. The company's profitability increased, high-end products continued to be released, and the “buy” rating was maintained.

Risk warning: Product demand falls short of expected risk; technology development falls short of expected risk.