\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 94 Suzhou Tfc Optical Communication Co.Ltd(300394) )
Event: on April 18, 2022, the company released the annual report of 2021. In 2021, the company achieved an operating revenue of 1.032 billion yuan, breaking the 1 billion mark for the first time, with a year-on-year increase of 18.20%; The net profit attributable to the parent company was 306 million yuan, a year-on-year increase of 9.77%.
In the fourth quarter, the revenue and net profit attributable to the parent company increased year-on-year, and the operating performance continued to improve. The company realized an operating revenue of 266 million yuan in 2021q4, with a year-on-year increase of 22.95%; The net profit attributable to the parent company was 93 million yuan, with a year-on-year increase of 44.52%. The continuous improvement of business quality was mainly due to the continuous growth of the demand for optical devices driven by the company’s active development of high-quality customers at home and abroad and the scale construction of global data centers; At the same time, the company used the raised funds to build the “high-speed optical engine construction project for 5g and data center”. After continuous R & D investment, the company successfully realized mass production. On the other hand, the company acquired Arctic Optoelectronics (Shenzhen) Co., Ltd. and Suzhou Tianfu precision optics Co., Ltd. in 2020, which contributed to the growth of revenue and profit.
The impact of merger and acquisition is gradually digested, and the profitability can stabilize in the long run. In 2021, the growth rate of net profit attributable to the parent company was lower than that of operating revenue. On the one hand, in 2021, the manufacturing expenses increased by 62.65% year-on-year, and the proportion of manufacturing expenses in operating costs increased by 4.82 PCT, mainly due to the consolidated impact and salary increase caused by the acquisition of Arctic optoelectronics and Tianfu precision in 2020, as well as the increase of depreciation and water and electricity charges caused by the plant fixed assets conversion and new equipment in Jiangxi Industrial Park. Affected by the rise of raw materials, labor costs, manufacturing expenses and product structure, the company’s gross profit margin in 2021 was 49.68%, down 3.12pct year-on-year. On the other hand, the company’s sales expenses increased by 48.96% year-on-year in 2021, mainly due to the consolidated impact and salary increase caused by the acquisition of Arctic Optoelectronics in 2020. We believe that the above adverse factors are temporary. At present, some products of Arctic optoelectronics have been gradually produced in Jiangxi Tianfu new factory. With the end of the shock period of M & a resource integration and the smooth progress of production conversion, the company has introduced more powerful measures in building an agile supply chain and production cost control, and continues to seek cost reduction and efficiency increase. In the future, the company’s gross profit margin is expected to stabilize and recover, Net profit growth is expected to continue to improve.
The strategic layout of core products in the optical communication market is gradually enriched, and the lidar + medical detection market has realized small batch delivery for some customers. The downstream of the optical module industry chain is the telecom and digital communication market. The telecom end is subject to the periodic fluctuation of China’s 5g base station construction process. The market demand for optical device products does not increase but decreases. The company’s optical active device achieved an operating revenue of 84.99 million yuan in 2021, a year-on-year decrease of 27.06%. Data communication terminal, traffic growth, cloud computing, meta universe and other application scenarios promote the construction of global data centers to maintain stable growth in 2021, driving the continuous growth of market demand for optical device products. Driven by the demand of the downstream market, the prosperity of the upstream optical device industry is improving, and the strategic layout of the company’s core products is gradually enriched. Many new product lines have been built and expanded, such as osaodm high-speed optical devices, optical isolators, high-density cable connectors, optical lens array, polarizer, Fau, AWG, WDM, high-speed optical engine and so on. In addition, the application field of the company’s optical device products has expanded from the optical communication industry to the lidar and medical testing industry. At present, some customers have achieved small batch delivery, and special personnel have been organized to follow up, strive to provide products and services for more mainstream manufacturers, fight a tough battle for cross domain application of optical device platform, and strive to cultivate new high-quality business growth points.
R & D investment continues to expand, and innovation drives the company’s long-term high-quality development. The company always adheres to the development concept of “taking R & D as the leader”, and strives to realize the innovation, exploration and leadership of the company in the field of optical devices by continuously increasing R & D investment and building the core technical capability of products. In 2021, the R & D investment of the company was 996727 million yuan, with a year-on-year increase of 28.94%, accounting for 9.65% of the operating revenue. By the end of 2021, the company had 399 R & D personnel, accounting for 14.47% of the total number of the company. The high proportion of R & D personnel is the source power for the company to maintain continuous innovation. R & D injected continuous impetus into the development of the company. In 2021, the construction project of high-speed optical engine for 5g and data center built by the company with raised funds was progressing smoothly, the products were transferred from small batch to mass production, the company transformed and upgraded from discrete components to hybrid integrated optical device platform, solved the needs of customers for high-speed components in one stop, and formed differentiated competition barriers; At the same time, the optical device products supporting 400g and 800g optical modules in each product line also realize R & D, sample delivery and mass production in batches; The sample delivery and small batch trial production of laser radar and optical devices for medical detection have realized the breakthrough of the company in the field of optical communication.
Investment suggestion: the company has always focused on optical device platform products. It is an industry-leading one-stop solution provider for vertical integration of optical devices, meeting the needs of various technical solutions of different customers and continuously creating new value for customers. At the same time, the company actively expands the field of non-optical communication, and has a broad market space in new fields such as lidar and medical detection, adding ballast to the company’s long-term high-quality development. We expect the company’s revenue to be 140.5/189.8/254.8 billion yuan and net profit to be 45.4/58.7/75 billion yuan respectively from 2022 to 2024, corresponding to EPS 1.5 billion yuan 16 / 1.50/1.92 yuan, with outstanding growth. Give 17 times PE in 2023, corresponding to the 6-month target price of 25.5 yuan, and maintain the investment rating of “Buy-A”.
Risk warning: the risk that the expansion of products in new fields does not meet the expectations, the risk of industrial policies and development, the risk of international trade disputes, the risk that the mass production of new optical communication product lines does not meet the expectations, the risk that the acquisition and integration does not meet the expectations, and the risk of diluting the immediate return by issuing shares to specific objects
