\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 08 Zhongji Innolight Co.Ltd(300308) )
Core view
In 2021, the company achieved steady growth in revenue and profit. The company achieved a year-on-year increase of 1.61 billion yuan in operating income in 2020; The net profit attributable to the parent company was 877 million yuan, a year-on-year increase of 1.33%; The net profit attributable to the parent company after non deduction was 728 million yuan, a year-on-year decrease of 4.78%. The net operating cash flow of the company in 2021 was 813 million yuan, which was significantly improved compared with 2020. Among them, the operating revenue and net profit attributable to the parent company in Q4 were 2.373 billion yuan and 317 million yuan respectively, an increase of 28.7% and 19.3% respectively.
On the revenue side, overseas digital communication customers accelerated the deployment of high-end optical modules such as 400g and 200g, driving the growth of the company’s order demand China Telecom Corporation Limited(601728) access network market demand has increased significantly, 10g PON market has increased rapidly, and Chuhan technology’s operating revenue and net profit have reached a record high; China’s 5g optical module market destocked, the demand fell, and the company’s related revenue fell. The decline in net profit attributable to the parent company after deduction of non equity was mainly due to the increase of equity incentive expenses, the sale of 100% equity of CIIC and the decrease of current performance of CIIC.
The first quarter of 2022 started well, and the market demand is expected to improve quarter on quarter. In the first quarter of 2022, the company’s operating revenue and net profit attributable to the parent company were 2.089 billion yuan and 217 million yuan respectively, with a year-on-year increase of 41.91% and 63.38% respectively. Both gross profit margin and net profit margin increased year-on-year. Thanks to the optimization of product design and the optimization of yield and manufacturing cost after climbing mass production, the sum of overall cost rate decreased. With the continuous volume of downstream high-speed optical modules, the company’s shipments will increase quarter on quarter.
Under the background of accelerated deployment of 200g and 400g, the company’s market share is stable. According to Dell’Oro statistics,
Global data center capital expenditure is expected to increase by 17% in 2022, which will drive the growth of optical module demand. The demand for 100g was stable, the demand for 200g and 400g increased rapidly, and 800g began to enter mass production. The company maintains a leading share in 200g and 400g and has obvious competitive advantage. It will give priority to enjoying the prosperity dividend of the industry.
The company increased the R & D investment and commercialization process of new products and technologies to lay the foundation for long-term growth.
800g series optical modules have completed the sample delivery, testing and certification to customers, and the Fab yield of 400g silicon optical chips has been continuously improved, which is ready for stable mass production; 800g silicon optical chip was successfully developed. In terms of coherence, products such as 400gzr and 200gzr for data center interconnection or telecom man scenarios have been produced and shipped in small quantities. The company has conducted pre research on Key Technologies of CPO; Set up a professional team to conduct in-depth excavation and research in the extension fields of optical communication industry such as lidar, and explore new performance growth points.
Risk tip: the capital expenditure of overseas cloud manufacturers is less than expected; Market price war risk; Exchange rate fluctuation risk.
Investment suggestion: raise the profit forecast and maintain the “buy” rating. Based on the continuous high boom of digital communication market demand and the high growth in the first quarter, we raised the profit forecast. It was originally estimated that the net profit attributable to the parent company in 20222023 was 1.02/1.14 billion yuan respectively, and it was raised to 1.11/13.0/1.5 billion yuan respectively in 20222024. The current share price corresponding to PE is 21 / 18 / 15 times respectively. Maintain the “buy” rating.
