\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
The first quarter results slightly exceeded expectations. The company issued the 2021 annual report and the first quarterly report of 2022. In 2021, the company achieved a revenue of 7.7 billion yuan, a year-on-year increase of 9.2%; The net profit attributable to the parent company was 877 million yuan, a year-on-year increase of 1.3%. In the fourth quarter of 2021, the net profit reached 320 million yuan, which was significantly higher than that in the third quarter, with a month on month increase of 44.5% and a year-on-year increase of 19.3%. The performance recovered significantly in the fourth quarter of 2021, mainly benefiting from the continuous improvement of demand on the data communication side in North America and the continuous high market share of the company. In the first quarter of 2022, the company realized a revenue of 2.09 billion yuan, a year-on-year increase of 41.9%; The net profit attributable to the parent company was 220 million yuan, a year-on-year increase of 63.4%, and continued to maintain high growth.
The operation quality has been continuously improved. The company’s overall gross profit margin of optical modules in 2021 was 26.26%, an increase of 0.63 percentage points year-on-year, of which the gross profit margin of high-speed optical modules was 27.97%, an increase of 0.11 percentage points year-on-year. In the first quarter of 2022, the overall gross profit margin was 26.28%, an increase of 1.17 percentage points year-on-year. The company has obvious advantages in technology, process, scale, channel, production yield and other aspects, driving the continuous improvement of the overall gross profit margin.
The optical module market continues to be booming, and the demand on the data communication side continues to rise. At present, technology companies at home and abroad have stepped up the exploration and application innovation in emerging fields such as metauniverse, and the general trend of continuous growth of data traffic is determined. With the entry of Internet giants such as meta into metauniverse, the capital expenditure on the overseas digital communication side is also expected to usher in a new turning point. Facebook’s capex in 2022 is expected to increase by about 60% year-on-year to $29-34 billion. At the same time, after setting the tone of digital economy, the subsequent significant growth of traffic is a deterministic direction. The expansion of infrastructure supporting traffic such as optical modules is a rigid demand, which will be highly deterministic in the next three to five years. With the continuous large-scale production of 400g and the rapid deployment of 200g and 800g, combined with the further recovery of China Telecom Corporation Limited(601728) side optical module, the optical module industry is expected to maintain a high boom. The company is expected to seize the industry opportunities, seize the intergenerational upgrading of products and customer expansion, and achieve sustained growth.
R & D investment continues to increase and competitiveness continues to expand. The company’s R & D expenses in 2021 were 540 million yuan, an increase of 6.8% year-on-year. Previously, the company set to raise 2.7 billion yuan for the production of 400g high-end optical modules and the R & D investment of 800g high-end optical modules. With the support of continuous high R & D investment and fixed increase funds, the company is expected to further improve the production capacity of 400g and 800g optical modules, further improve the technical platform and product line, form a complete industrial chain from chip packaging, photoelectric components and optical modules, and improve the industrial status and performance level.
Investment suggestion: we believe that with the company’s continuous R & D investment and the release of fixed increase capacity, the company’s performance is expected to continue to grow steadily. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 1.24/14.9/1.76 billion, corresponding to 19 / 16 / 13 times of PE respectively, maintaining the “buy” rating.
Risk tip: the demand for overseas digital communication is less than expected, and the market competition is intensified.
