On October 18th, The Star Market Daily reported (Reporter Wu Xuguang): Today (October 18th), Henan Shijia Photons Technology held the earnings conference for the first half of 2024 and the third quarter. At the conference, Chairman of the Board of Directors and General Manager, Ge Haiquan, and other senior executives of the company introduced the latest progress in the company's optical chips and devices, indoor optical cable, overseas market layout, and future market prospects.

Benefiting from the global "AI wave" sweeping across the globe, the A-share secondary market's high-speed optical module/optical chip sector has become a hotspot.

From the performance disclosed by Henan Shijia Photons Technology, the company's revenue and net income for the first three quarters of 2024 have both increased. On the evening of October 17th, Henan Shijia Photons Technology released its financial report, showing that as of the third quarter of 2024, the company's total operating income was 0.729 billion yuan, a year-on-year increase of 34.77%; the net income attributable to the parent company was 36.209 million yuan, turning a loss into a profit.

In terms of profitability, the company's gross margin for the first three quarters of 2024 was 25.84%, showing a slight increase from 19.78% in the same period of 2023, but still lower than the stage high of 27.88% in 2020.

In response to this, an investor repeatedly inquired with the company, "Is the competition in the optical chip market intensifying? How is the company dealing with the impact of price drops on some products?"

At the earnings conference, Ge Haiquan, Chairman of the Board of Directors and General Manager of Henan Shijia Photons Technology, told reporters from The Star Market Daily and some investors that in view of the market structure of optical chip market, with the continuous expansion of the market size, competition intensifies, promoting higher market concentration.

In response to the risk of product price decline, "the company will continue to strengthen cost reduction and efficiency improvement, increase research and development investment, improve product yield, and reduce product costs." Ge Haiquan added.

Henan Shijia Photons Technology focuses on the optical communication industry, with main business covering three major sectors: optical chip and device, indoor optical cable, and cable materials. The main products include PLC splitter chip series, AWG chip series, DFB laser chip series, optical fiber connectors, indoor optical cables, cable materials, etc., with main applications in the backbone network and metropolitan area network, fiber to the home, datacenters, etc.

At the earnings conference, regarding the current orders on hand at Henan Shijia Photons Technology, the company's board of directors' secretary, Mei Xue, responded that the company's current orders on hand are stable, production and operation are normal. The company will adapt production capacity according to customer needs to improve order flexibility and production delivery capability.

"We maintain a cautiously optimistic attitude towards next year's market and company's operation. The demand for AI-related products continues to show strong growth trend." When discussing the future recovery of the telecommunications market and the demand for indoor optical cables, and polymer materials for cables, Ge Haiquan stated that the 2024 telecommunications investment and construction are gradually recovering, with further marginal improvements in the access network in 2025. The indoor optical cables and polymer materials for cables in synergy with the optical chip and device industry chain have shown varying degrees of growth compared to the same period last year.

Looking specifically at the product segmentation, the company is expanding into the high-speed component field while advancing the development of active chip business.

Among them, the DFB laser is the 'heart' of the optical module, with a relatively high technical threshold.

During the earnings conference, an investor inquired about the progress of research and development on DFB laser chip and others. Independent director Hu Weisheng of Henan Shijia Photons Technology mentioned that the company is currently undergoing customer validation for high-power lasers and devices matched with silicon light, such as 100mw, 200mw CW DFB light sources.

"In the active field, Henan Shijia Photons Technology has developed 10GEML and 50G EML lasers for access networks, currently undergoing internal validation; as well as 100G EML lasers for datacenters, currently undergoing internal verification," revealed Ge Haiquan during the conference.

It is worth mentioning that in July this year, the State Council Information Office held a series of themed press conferences on 'Promoting High-Quality Development,' where the National Bureau of Statistics stated that they will promote the construction of a national integrated computing power network. Next, efforts will focus on promoting 400G/800G high-bandwidth all-optical connections between national hub nodes and demand locations.

The reporter from the Star Daily noticed that Henan Shijia Photons Technology is also actively laying out the 400G/800G DR4/DR8 MTFA components. Regarding the market demand for this category and the downstream market sales situation, Meixue, the secretary of the board of directors, stated that the company's MTFA component products are mainly for customers in the optical communication field, including both domestic and overseas markets, with significant revenue growth this year.

To address trade risks and open up overseas markets, Henan Shijia Photons Technology is accelerating its global channel layout.

"The proportion of company's overseas revenue is expected to gradually increase." At the earnings conference, while introducing the expansion of the overseas market and revenue situation, Meixue mentioned that in 2024, the company will strengthen the comprehensive marketing power of the international business team in the marketing center.

"Henan Shijia Photons Technology's subsidiary in Thailand officially opened and started operation in August 2024, mainly engaged in the research and development, production, sales, and services of optical devices, indoor optical cable products, and other products of the parent company, currently in the stage of increasing production capacity." Ge Haiquan stated.