Incident: The company released its 2016 semi-annual report. 24H1 achieved revenue of 3.11 billion yuan, +10.48% year over year; net profit to mother 0.209 billion yuan, -12.64% year over year; deducted non-net profit of 0.207 billion yuan, -1.24% year over year.
24H1 gross profit margin 22.69% (YoY +0.96pcts), net profit margin 6.71% (YoY -1.78pcts).
Looking at Q2 alone, 24Q2 revenue was 1.819 billion yuan, +17.61% YoY, +40.89%; net profit to mother was 0.131 billion yuan, -3.99% YoY, +69.53% month-on-month; after deducting non-net profit 0.133 billion yuan, +1.04% YoY and +82.03% month-on-month. 24Q2 gross profit margin 22.80% (YoY +1.32pcts, month-on-month +0.27pcts), net profit margin 7.22% (YoY -1.62pcts, month-on-month +1.22pcts).
Cost control is good, and R&D investment continues to increase. 24H1's R&D expenses were 0.312 billion yuan, +10.48% year on year, the R&D expense ratio was 10.04%, the same year on year; sales expense ratio was 2.56%, +0.63pcts year on year; management expense ratio was 2.31%, +0.11pcts year on year; financial expenses ratio -1.67%, +1.90 pcts year on year. 24H1 operating cash flow - 42.56 million yuan, YoY -118.17%; 24Q2 operating cash flow 24.61 million yuan, +4.08% YoY. As of 24H1, inventory was 2.987 billion yuan, +41.95% YoY; contract liabilities were 0.118 billion yuan, +48.89% YoY; and monetary capital was 3.695 billion yuan.
Domestic computing power is in high demand, and the company is expected to fully benefit. After experiencing a decline in the 2021-2023H1 period, the capital expenditure of Chinese information companies continued to rise, driven by AI hotspots. The capital expenditure of leading information companies reached the second-highest level in history, only lower than 21Q1. Guangxun Technology has a high share of large domestic cloud vendor customers. With the development of the domestic Internet market, the capital expenditure ratio of large domestic cloud vendors on a global scale is expected to increase in the future, and the company's market share as a beneficiary is expected to increase.
The delivery capacity of digital communication products has been improved, and the order situation is better. 24H1 continues to improve overseas manufacturing and high-end digital communication product delivery capabilities, and has successfully completed the production capacity construction of overseas manufacturing bases and high-end optoelectronic device industry bases in the Wuhan Donghu Comprehensive Free Trade Zone. The new plant in the Wuhan East Lake Comprehensive Insurance Zone began relocation and equipment settlement at the end of April 2024. The construction speed exceeded expectations. Currently, the company's order situation is relatively good. We believe that domestic computing power is currently in strong demand, and with the gradual release of the company's production capacity and the gradual availability of materials, it is expected that there will be greater performance flexibility.
Profit forecast. We believe that as AIGC boosts demand for high-speed optical modules at home and abroad, and inventory removal in the telecommunications and traditional digital communication industries comes to an end, the optical communications industry is expected to maintain rapid long-term development. Guangxun Technology is in a leading position in the competitive landscape of the industry, and the business is expected to maintain steady growth. We expect the company's net profit for 2024-2026 to be 0.819, 1.021, and 1.233 billion yuan, respectively, and EPS of 1.03 yuan, 1.29 yuan, and 1.55 yuan. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given a 2024 PE range of 40-50X, corresponding to a reasonable value range of 41.20-51.50 yuan, which is “superior to the market” rating.
Risk warning. Industry demand is picking up and uncertainty, downstream manufacturers are expanding upstream, and industry competition is intensifying.