\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 94 Suzhou Tfc Optical Communication Co.Ltd(300394) )
Key investment points
Company announcement: the company released the first quarterly report of 2022, during which the operating revenue was 283 million yuan, a year-on-year increase of 16.2%; The net profit attributable to shareholders of listed companies was 83 million yuan, with a year-on-year increase of 18.1%; The net profit attributable to shareholders of listed companies after deducting non recurring profits and losses was 77 million yuan, with a year-on-year increase of 11.8%. The company achieved EPS (basic) 0.21 yuan.
Overcoming the difficulties of the epidemic, the performance of 22q1 slightly exceeded expectations. Under the influence of the epidemic, except for Aurora Borealis, the company’s overall operation was normal. The company’s performance in the first quarter was strong, realizing the double growth of revenue and net profit. The revenue in a single quarter reached a new high in the early stage, and the net profit reached a historical high. The comprehensive gross profit margin was 49.69%, down 4.35 PCT year-on-year and up 2.48 PCT month on month, mainly due to the adjustment of product structure and the launch of new production capacity. In terms of expenses, the total expenses of the company in the first quarter were 46.3 million yuan, with an expense rate of 16.37%, of which the expense rates of sales / management / R & D / finance were 1.44% / 6.04% / 9.52% / – 0.62% respectively, with a year-on-year increase of + 0.05 / – 2.37 / + 0.55 / + 0.74 PCT respectively. The overall performance of the company’s quarterly expenses is stable. After the acquisition of Arctic optoelectronics, the company’s quarterly total expenses are stable between 40 million and 50 million, showing the company’s excellent governance level and efficient operation ability. The company is the world’s leading core supplier of optical devices. Its product categories continue to expand, build vertical integration capability, and realize the transformation from product parts supplier to solution platform. Relying on the digital communication and 5g markets, the company has achieved continuous growth in scale. By integrating existing technical capabilities and increasing the extension of non communication fields such as lidar and medical detection, the company has created the second growth point of performance.
The demand of digital communication market is strong, and overseas production capacity is actively distributed. North American cloud manufacturers continued to increase capital expenditure. In 2021q4, Amazon, Google, Microsoft and meta (FB) had a total capital expenditure of US $34.088 billion, a year-on-year increase of 24.13% and a month on month increase of 7.6%. The demand for optical devices in the digital communication market continues to grow. We expect the scale construction of the global data center to drive the continuous volume of 400g / 200g and other high-speed optical modules. According to lightcounting data, the sales of optical modules in Q1-Q4 global data centers in 2021 were $10.59/11.96/12.99/1.449 billion respectively, with a year-on-year increase of + 29% / + 8% / + 26% / + 46%, of which the sales of Ethernet optical modules reached a new high. In order to meet the demand of overseas market, the company has successively set up subsidiaries in Japan, the United States and other places, and plans to set up overseas sales headquarters in Singapore to form a three-dimensional global sales technical support network with division of labor and cooperation, so as to improve the local service capacity and corresponding speed of key customers. In addition, the company plans to set up a production base in Southeast Asia to enhance its core competitiveness in the global market. The newly-built production capacity in Jiangxi, China is released in an orderly manner to alleviate the cost side pressure of Arctic optoelectronics production in Shenzhen, improve the company’s comprehensive gross profit margin, release the production capacity of glass cold processing and WDM passive components, and is expected to strengthen the standardized management of production links.
The short-term optical engine is expected to be large-scale, and pay attention to the progress of lidar for a long time. The high-speed optical engine and lidar projects are the two long-term growth points of the company. The optical engine will be delivered in batches in 2021q3 and will be mainly used for 400g / 800g and higher speed digital communication optical modules. The mass production of high-speed optical engine helps the company realize vertical extension and integration in business, improve the unit value of the company in the optical module, meet the long-term trend in technology and enhance the company’s competitive advantage. In the long run, the lidar market has broad prospects. According to Frost & Sullivan’s prediction, the global lidar market in the field of advanced driving assistance systems will increase from US $120 million in 2019 to US $4.61 billion in 2025, with a compound growth rate of 83.7%. At present, more than 20 models released / mass produced in the world have been determined to be equipped with lidar, and the on-board lidar market is in the early stage of mass production. Relying on the existing mature optical device R & D platform, the company uses the team to provide customized optical device products in basic materials, and has established a special sales team and project team to continue to follow up. At present, the company has the ability of rapid scale and quantity delivery, so as to provide guarantee for long-term performance growth.
Investment suggestion: the company is the leading service provider of China’s optical device integration platform system, and continues to expand its product line through endogenous extension. With the release of the demand for high-end optical modules in the downstream data center, the company’s passive business has grown strongly, the optical engine has entered the state of batch delivery, and the source business is ready to go. The new business of lidar and medical detection has made good progress and is expected to build the second growth point of the company. We expect the net profit of the company from 2022 to 2024 to be 392 million yuan / 490 million yuan / 600 million yuan, and EPS to be 1 yuan / 1.25 yuan / 1.53 yuan respectively, maintaining the buy rating.
Risk warning: the market demand of digital communication is less than expected; The new production line is put into operation less than expected; The progress of lidar business is less than expected.
