\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
Company announcement: the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved revenue of RMB 7.695 billion, a year-on-year increase of 9.16%, net profit attributable to parent company of RMB 877 million, a year-on-year increase of 1.33%, and net profit attributable to non parent company of RMB 728 million, a year-on-year decrease of 4.78%. In the first quarter of 2022, the operating revenue was 2.089 billion yuan, with a year-on-year increase of 41.91%, the net profit attributable to the parent was 217 million yuan, with a year-on-year increase of 63.38%, and the net profit deducted from non attributable to the parent was 196 million yuan, with a year-on-year increase of 79.62%.
The annual performance was in line with expectations, and 22q1 achieved restorative growth. Affected by the continuous positive demand for high-speed optical modules from major overseas customers, the company achieved revenue of 2.373 billion yuan / 2.089 billion yuan in 21q4 and 22q1 respectively, with a year-on-year increase of 28.65% / 41.91%. 22q1 made a good start. In terms of business, in 2021, the company achieved revenue of 6.363 billion yuan / 897 million yuan / 327 million yuan respectively for high-speed optical modules / low-speed optical modules / optical components, with a year-on-year increase of + 9.1% / + 3.19% / + 103.09% respectively. Zhongji intelligent equipment business was stripped off in December 2021, and the company will go into battle light in the future. The comprehensive gross profit margin was 25.57%, of which the gross profit margin of high-speed optical modules was 27.97% respectively, with a year-on-year increase of 0.11 PCT, mainly due to the significant increase in the gross profit of 400g products. The gross profit margin of medium and low speed optical modules was 14.14%, with a year-on-year increase of 3.45 PCT. In terms of expenses, the company’s sales / management / financial expense rate in 2021 was 0.95% / 5.64% / 1.09% respectively, with a year-on-year increase of -0.56 / + 0.39 / + 0.18 PCT respectively. The significant decline in the sales expense rate was mainly due to the company’s withdrawal of product quality margin according to the shipped products in 2020, and there was no such event in 2021. The management expense ratio has increased slightly, mainly because 2021 is the peak amortization expense of the company’s equity incentive. Excluding the impact of equity incentive, the growth rate of the company’s annual net profit attributable to the parent is expected to reach about 7%. With its leading technology R & D capability, low-cost product manufacturing capability and comprehensive delivery capability, the company continues to be recognized by customers. According to LC and omdia data, the company ranked second in the world in 2021.
The demand for high-speed optical modules of overseas digital communication is improving, and 800g begins to be delivered in batches. The optical module market has maintained steady growth. According to LC data, the global market scale will maintain a CAGR growth rate of 14% in the next five years and is expected to reach US $17.6 billion in 2026. In terms of data communication, the capital expenditure of key customers of cloud manufacturers in North America continues to increase. According to Dell’Oro data, the capital expenditure of global data centers in 2021 was more than US $200 billion, a year-on-year increase of 9%, and the growth rate is expected to reach 17% in 2022. The high-speed digital communication optical module has entered the stage of batch delivery. The company closely follows the needs of customers, gradually implements the raised investment capacity, and strengthens the delivery capacity and product quality. 400g and 200g have become the main shipping products of the company, 800g has started batch delivery, and the shipment volume in overseas markets continues to grow. In terms of telecommunications, China’s 5g network construction has been steadily promoted. In 2021, the market demand for 5g optical modules was flat year-on-year, and the company’s 5g product revenue decreased slightly compared with the same period, but it maintained a leading share in advantageous products such as 200g return and 50g intermediate transmission. In addition, China’s dual Gigabit plan has driven the demand for 10G PON and other access network optical devices and optical modules. According to omdia data, the global PON market scale will increase with 12.3% CAGR from 2020 to 2027, and is expected to reach US $16.3 billion in 2027. Chengdu Chuhan, the holding subsidiary of the company, as the main supplier of China Telecom Corporation Limited(601728) access network, benefited from the construction of dual Gigabit optical network, and its revenue and net profit have reached a record high.
Maintain high R & D investment and forward-looking layout of on-board lidar. The company has an expert team composed of global excellent personnel, and is based on independent technological innovation to build an internationally competitive R & D, design and manufacturing company of high-speed optical modules. In 2021, the company invested 565 million yuan in R & D, with a year-on-year increase of 8%, accounting for 7.35% of the current revenue. The company continued to increase the R & D investment in new products and technologies, and achieved market-oriented results. The Fab yield of 400g silicon optical chip is maintained and improved, which is actively prepared for subsequent mass production. 800g silicon optical chip was successfully developed. Coherent optical modules such as 400gzr and 200gzr, which are used in data center interconnection or telecom man scenarios, have been produced and shipped in small quantities. The company has conducted pre research on key technologies such as CPO, and actively built an advanced photonic chip industrialization technology platform and a 2.5D and 3D hybrid packaging platform. The above projects are expected to create new performance growth points for the company. The company accelerated the integration of the industrial chain, jointly established an industrial fund, arranged the upstream of the optical module industrial chain, reduced the cost by introducing domestic customized chips, and improved the competitiveness of the company’s products in the Chinese market. In addition, because lidar and optical module have certain commonalities in the underlying process and technology, and the product technology can be reused, the company has established a professional lidar team to continue the in-depth excavation and research in the early stage and explore new performance growth points of the company in the future.
Investment suggestion: the company is the global leader in high-speed optical modules. 400g / 200g has become the main profit growth point of the company. 800g products have been supplied in batches, and the demand in the telecommunications field is expected to pick up. According to the operation in the first quarter and the demand of overseas digital communication major customers, we adjusted the company’s profit forecast. It is estimated that the company’s net profit from 2022 to 2024 will be 1137 million / 1422 million / 1642 million respectively (the original forecast from 2022 to 2023 was 1172 million / 1423 million), and EPS will be 1.42 yuan / 1.78 yuan / 2.05 yuan respectively, maintaining the buy rating.
Risk warning: the risk that the demand of North American digital communication market is less than expected; The risk that the 5g construction progress is lower than expected; Risks of overseas trade disputes; Risk of intensified market competition
