\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
Event overview: on April 7, 2022, the company announced that it planned to use its own funds to buy back the company’s shares in the form of centralized bidding transaction for the implementation of equity incentive plan or employee stock ownership plan. The total capital of this share repurchase shall not be less than RMB 100 million (inclusive) and not more than RMB 200 million (inclusive), the share repurchase price shall not exceed RMB 45.00/share (inclusive), and the repurchase period shall not exceed 12 months from the date when the board of directors deliberates and approves the share repurchase proposal.
The buyback highlights the bottom of value and is intended to be used to implement equity incentives. It is optimistic about the long-term development of the company: the company is the leader of the global digital communication optical module and deeply binds many downstream cloud computing giants. It has obvious advantages in the field of 200g and 400g products and is expected to fully benefit from the current demand of downstream cloud computing giants. On this basis, the company has made extensive and in-depth layout in many cutting-edge fields such as 800g, silicon optical and coherent optical modules, with full growth momentum in the future. Among them, 800g companies have obvious first mover advantages. Last year, they have successfully entered key customers and achieved small batch shipments. This year, they will usher in mass production. At present, the company has launched the repurchase plan, which to some extent reflects that the company’s value is undervalued and the value bottom is prominent. The repurchase will provide important support for the company’s value and be optimistic about the company’s long-term development.
The prosperity of the digital communication field is high, and the performance of leading companies is expected: from the perspective of the overall demand of the industry, the digital communication market has continued to improve since the second quarter of last year. With the announcement of entering the cloud universe by meta and Microsoft last year, the cloud giants are expected to open a new round of capital expenditure competition on the infrastructure side. The capex growth of meta2022 is expected to exceed 50%, and capex of other cloud computing giants is expected to be improved, Therefore, it is expected to drive the demand for upstream optical modules. At the company level, Zhongji Innolight Co.Ltd(300308) has many production capacity layouts in China and overseas, and the overseas revenue accounts for more than 70%. Therefore, Q1 this year is not affected by the Chinese epidemic, and the overall performance is expected under the background of continuous high demand in the digital communication market.
The silicon optical field has been prospectively laid out for many years, accelerated the integration to the upstream of the industrial chain, and has broad development space in the future: the silicon optical solution has a high degree of integration, and has a good performance in peak speed, energy consumption and cost, so it is one of the important development directions of optical modules in the future. As early as a few years ago, the company began to develop silicon optical chips for forward-looking layout. At present, the company has the ability of independent design and packaging of silicon optical chips, which is scarce in the industry. At ofc2022 exhibition in March, the company’s 800g silicon optical scheme was launched, which further enriched the company’s 800g product matrix. At the same time, its 400gdr4 + and 100gfr1 based on self-designed silicon optical chips have entered the market introduction stage. On the whole, the progress of silicon optical field is in the forefront of the industry, and there is a broad space for development in the future.
Investment suggestion: we expect the net profit attributable to the parent company from 2021 to 2023 to be RMB 875 / 1164 / 1537 million respectively, and the corresponding PE multiple is 28x / 21x / 16x. The company is a global leader in digital communication optical modules. 200g, 400g and other products will fully benefit from the demand of downstream cloud giants. At the same time, the company has obvious first mover advantages in the field of 800g optical modules, and is expected to fully enjoy the dividends in the window period of technological change. Maintain a “recommended” rating.
Risk tip: the demand for optical modules of cloud computing giants is lower than expected, the industry competition intensifies, and the price of optical modules decreases too much
