\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
Event overview
The company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company realized an operating revenue of 7.695 billion yuan, a year-on-year increase of 9.16%; The net profit attributable to the parent company was 877 million yuan, a year-on-year increase of 1.33%. In 2022q1, the company achieved an operating revenue of 2.089 billion yuan, a year-on-year increase of 41.91%; The net profit attributable to the parent company was 217 million yuan, a year-on-year increase of 63.38%.
Analysis and judgment:
Overseas cloud manufacturer customers promote the growth of high-speed optical communication modules, the China Telecom Corporation Limited(601728) market advances steadily, and the dual Gigabit optical network project drives the access network business
Benefiting from the increased capital expenditure of key customers of cloud manufacturers in North America and the opportunity of batch deployment of 400g and 200g, 400g and 200g have become the main shipping products of the company, and the shipment volume in overseas markets continues to grow. In 2021, the overseas market revenue increased by 18.25% year-on-year. In 2022q1, the revenue was 2.089 billion yuan, with a year-on-year increase of 41.9%. We expect that the overseas revenue is expected to continue to grow rapidly under the support of capex, an overseas cloud manufacturer.
China’s 5g network construction has been steadily promoted. A total of 6400005g base stations have been built throughout the year, which is basically the same as the previous year. The market demand for 5g optical modules has not increased significantly year-on-year. The company’s 5g product revenue has declined compared with 2020, but it still maintains a leading share in products such as 200g retransmission and 50g intermediate transmission China Telecom Corporation Limited(601728) operators started the dual Gigabit optical network project of fixed network width access, which boosted the demand for optical devices and optical modules of access networks such as 10gpon. As the main supplier of China Telecom Corporation Limited(601728) access network, Chengdu Chuhan, the holding subsidiary of the company, benefited from the demand driven by the construction of dual Gigabit optical network. During the reporting period, the revenue, net profit and other indicators of Chengdu Chuhan reached a record high.
The scale advantage drives the company’s gross profit margin to rise steadily
In 2021, the company’s comprehensive gross profit margin was 26.28%, with a year-on-year increase of 0.63pct. In 2022q1, the company’s gross profit margin was 26.28%, with a year-on-year increase of 1.17pct. With the rise of upstream raw materials, the company’s production scale and supply capacity rank among the forefront of the industry. With the advantage of scale, the company has greatly improved its ability to undertake large orders and effectively reduced the company’s manufacturing and procurement costs. With the continuous growth of orders, the overall gross profit margin has increased steadily.
The three expense rates remain stable, with long-term high R & D investment to build leading innovation ability
In 2021, the company’s sales / management / financial expense ratio was 0.95% / 5.64% / 1.09% respectively, with a year-on-year increase of -0.56 / + 0.39 / + 0.18pct respectively; Among them, the sales expense rate decreased significantly, mainly because the company withdrew the product quality deposit according to the shipped products in 2020, and there was no such event in 2021. In 2022q1, the company’s sales / management / financial expense ratio was 0.89% / 6.55% / 0.94% respectively, with a year-on-year increase of -0.16 / + 0.23 / – 0.19pct respectively; The three rates remained basically stable.
In 2021 and 2022q1, the R & D expense rates of the company were 7.03% (-0.15pct) and 7.39% (-0.76pct) respectively. During the reporting period, the company’s 800g series products completed customer sample delivery, testing and certification, and the Fab yield of 400g silicon optical chips continued to improve. At the same time, 800g silicon optical products based on self-designed silicon optical chips were displayed on site in ofc2022. In terms of coherence, 400gzr and 200gzr have formed small batch production and shipment. In addition, the photon chip industrialization technology platform and 2.5D and 3D hybrid packaging platform continuously built by xuchuang Industrial Research Institute lay the foundation for the vertical integration of the subsequent industrial chain.
Industry integration has accelerated, and the company’s global market share is second to none
According to the lightcounting report, the market share of Chinese optical device manufacturers increased rapidly from 15% in 2010 to more than 50% in 2021. The industry is in the stage of accelerated integration, and the industry concentration is further improved. Mergers and acquisitions and vertical integration of the industrial chain have become an important direction of the company’s development. In the latest report of omdia in 2021, Zhongji Innolight Co.Ltd(300308) has a market share of about 10%, ranking the second in the world, with a market share of 12% in the fourth quarter. The rapid increase of the company’s market share in 2021 was mainly driven by the rapid growth of 200g / 400g orders from overseas cloud manufacturers.
Investment advice
Considering the deferred impact of China’s 5g and digital communication market demand and the uncertainty of upstream raw material shortage, the profit forecast is reduced based on the principle of prudence. It is estimated that the company’s revenue in 20222024 will be adjusted from 94.56/113.57/n/a to 9.013106.96/12.903 billion yuan respectively, and the earnings per share will be adjusted from 1.57/1.95/n/a to 1.34/1.60/1.87 yuan respectively, corresponding to the closing price of 29.04 yuan / share on April 25, 2022, and PE will be 21.7/18.2/15.5 times respectively, Maintain the “overweight” rating.
Risk tips
The demand for 5g and data center slows down, the company’s revenue decreases and the inventory price drops; The competition of 400g and other products intensifies the risk; Systemic risk.
