\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
Event overview: on April 24, the company released the annual report of 2021 and the first quarterly report of 2022. In the whole year of 2021, the company achieved an operating revenue of 7.695 billion yuan, a year-on-year increase of 9.16%, a net profit attributable to the parent of 877 million yuan, a year-on-year increase of 1.33%, and a deduction of non attributable net profit of 728 million yuan, a year-on-year decrease of 4.78%. In the first quarter of 2022, the operating revenue was RMB 2.089 billion, with a year-on-year increase of 41.91%, the net profit attributable to the parent was RMB 217 million, with a year-on-year increase of 63.38%, and the net profit deducted from non attributable to the parent was RMB 196 million, with a year-on-year increase of 79.62%.
The demand of overseas digital communication market continues to be high, and the performance of 22q1 is much higher than expected: the demand of overseas digital communication has built the main driving force for the company’s performance growth in 2021. Since the second quarter of 2021, the overseas demand has continued to rise, and the proportion of the company’s overseas revenue has increased from 69.3% in 2020 to 75.1% in 2021. In contrast, the demand growth of the Chinese market slowed down in 2021, which affected the performance growth of the company in 2021 to a certain extent. Looking forward to 2022, with the marginal improvement of China’s demand and the overseas digital communication market demand is expected to remain high (the capital expenditure of cloud computing giants represented by meta is expected to see further growth), the optical module industry will still maintain a high outlook. In this context, the company’s 22q1 performance greatly exceeded expectations, with a year-on-year increase in revenue of 41.91% and a year-on-year increase in net profit attributable to the parent company of 63.38%.
While the overall prosperity of the optical module field is high, the company, as the leader of digital communication optical module, is continuously strengthening its leading advantage: according to the data of omdia, the market share of the company ranked second in the world in 2021, about 10%, second only to II-VI. It is worth mentioning that 2021 is a year for the company to accelerate the increase of market share. Thanks to the significant increase in the sales volume of 200g and 400g products, the market share of the company in the fourth quarter of 2021 is as high as 12%. Among the top ten optical module manufacturers, 2021 has the largest increase in market share.
While continuously consolidating the competitive advantages in 200g and 400g fields, the company continues to focus on the layout of cutting-edge fields and expand the growth space in the future: in the short term, 800g products have been transferred to mass production from small batch this year, with a leading progress in the industry. Relevant aspects have achieved initial results since cutting into this field in 2020, and 400gzr and 200gr have achieved small batch shipments. In the medium and long term, after years of forward-looking layout, the company in the silicon optical field now has the rare independent design and packaging capacity of silicon optical chips in the industry. 400g silicon optical modules have begun to enter the market introduction stage. With the continuous improvement of Fab yield of silicon optical chips, it is fully prepared for large-scale mass production. At the same time, 800g silicon optical chips have been successfully developed. At the same time, the company has also started the pre research of key technologies of CPO, and continues to build an advanced photonic chip industrialization technology platform and a 2.5D and 3D hybrid packaging platform. Overall, the layout progress of the company in many cutting-edge fields is at the forefront of the industry, and it is expected to fully seize the development opportunities brought by the technological transformation of the optical module industry in the future.
Investment suggestion: we expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 1.164/15.37/1.926 billion respectively, and the corresponding PE multiple is 20x / 15x / 12x. 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’s progress in 800g, coherent optical modules, silicon optical modules and other fields ranks in the forefront of the industry, and is expected to fully seize the development opportunities brought by the technological changes in the optical module industry in the future. Maintain a “recommended” rating.
Risk tip: the demand in the downstream data communication field is lower than expected, the industry competition intensifies, and the price of optical module decreases greatly
