Key points of the announcement: The company released the 2024 semi-annual report. 2024H1's revenue was 13.849 billion yuan, -7.02%; net profit to mother was 0.217 billion yuan, +8.68% year over year; net profit without return to mother was 0.214 billion yuan, +8.71% year over year.
Gross margin has increased significantly, and profitability has improved. During the reporting period, the company's gross margin reached 21.33%, +2.17pct; the net sales margin was 1.56%, +12.80pct year on year, and the company's profitability increased. In terms of costs, the R&D cost rate was 11.48%, -1.26pct year on year. The main reason was that the company optimized the R&D project structure and focused on key R&D areas. Sales, management, and finance expense ratios were 7.11%, 1.21%, and 1.90%, respectively, and +0.64pct, +0.08pct, and +1.12pct, respectively.
The “5G+ Industrial Internet” realizes the deep integration of informatization and industrialization. Fiberfire integrates optical fiber communication, data communication, cloud computing, and network security to build a digital foundation integrated into the cloud network, strives to provide all-round support for the industrial chain, supply chain security, and digital transformation of the industry, and realizes intelligent connection between network resources and industry applications.
The main optical communications industry maintains its leading edge, and the computing and storage business is growing rapidly. The company has complete optical communication industrialization capabilities from optical fiber, optical cable, and chip to system equipment. In 2023, Fiberfire Communications's communication system equipment sales revenue was 23.785 billion yuan, an increase of 13.72% over 20.916 billion yuan in 2022. In the marine optical communication industry, the company has built a marine optical cable production base to expand the marine optical communication business, and FitOcean solutions have achieved self-development and initial application of a full range of products. Furthermore, the company is seizing the big computing power development opportunities brought by AI, and the computing and storage business continues to grow. The company collaborates 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. The computing and storage business has been growing at a compound rate of more than 50% in recent years.
The company is committed to deepening customer relationships and continuously optimizing operating efficiency. The company has a global marketing service network and industrial layout, which continues to expand from Wuhan to China to the world. As of March 2023, the company has 1+6 industrial bases in China and has built nearly 400 national optical communication trunks in various industries.
Fenghuo's smart optical network covers 31 provinces, autonomous regions and municipalities across the country. Currently, it has 2 overseas production bases, 8 overseas R&D centers, 11 global delivery centers, and 30 overseas representative offices around the world. The products, solutions and services cover more than 100 countries and regions.
Profit forecast: The company's net profit for 2024-2026 is expected to be 6.92/9.50/ 1.131 billion yuan, +36.84%/+37.41%/+19.00% year-on-year, corresponding PE is 25x/ 18x/ 15x, respectively, maintaining a “buy” rating.
Risk warning: New product technology development falls short of expected risks; network visualization and AI industry demand falls short of expectations; performance forecasts and valuation judgments fall short of expectations.