Minsheng **shares*** Fang Jing, Ma Tianyi, Ma Jiawei, Yang Dongyu recently conducted research on Yuanjie Technology and released a research report "The company's first coverage report: domestic high-speed chip leader, downstream optical application scenarios continue to develop", this report gives a ** rating to Yuanjie Technology, the current stock price is 131$94.
Yuanjie Technology (688498).
High-speed optical chips account for most of the cost of optical module preparation, and the important technical barriers in the industrial chain are located. Under the trend of increasing transmission rate, the proportion of optical chips in the cost of optical modules continues to increase, accounting for 40% of 10G-25G optical modules, and 60% of optical modules above 25GBS. The company's laser chip products are involved in optical communication fields such as optical fiber access, 4G and 5G mobile communication networks, and short-distance transmission networks in data centers, and continue to expand new application scenarios of optical chips, and actively explore the layout of lidar, consumer electronics and other fields.
In the era of AI computing power, the data communication market is the main high-elasticity field for downstream shipments, and the superiority of silicon photonics modules is reflected. Optical chips are used in optical modules, so they are directly related to the prosperity of downstream optical modules, and the current demand in the telecommunications field (optical fiber access, mobile communication) is generally stable, and at the same time, AI is expected to bring core increments to the field of data communication. Although the spending of overseas Internet giants on cloud business is expected to remain stable in the medium term, the rise of generative AI and the development of their own AI large model business have brought unprecedented demand for computing power, which has brought greater requirements for the low-latency and high-speed performance of optical transmission networks in data centers, thereby driving the shipment of high-speed optical modules to increase rapidly, and at the same time, 400G optical modules have accelerated to 800G 1On the other hand, NVIDIA Huawei's AI servers have changed the data transmission path of Ethernet, and the network architecture upgrade has further driven the shipment of high-speed optical modules. At the same time, the advantages of silicon photonics module integration and low power consumption will make its competitiveness in the short-distance application scenario of data communication more and more prominent. According to lightcounting**, from 2023 to 2028, the overall global optical module market size will achieve a high annual compound growth rate of 16% in the next five years, of which optical modules for data centers will be the fastest growing field, and it is expected that the overall share of silicon photonics modules in optical modules will increase from 24% in 2022 to 44% in 2028.
Continuing to expand overseas markets, the company leads the localization of high-speed optical chips. The company has formed an IDM R&D and manufacturing model based on "two platforms" to realize the manufacturing of products with high electro-optical conversion efficiency and high-speed products. In the field of high-speed laser optical chips, the company's multiple high-end product lines are benchmarked against international manufacturers, 100GPAm4EML products and 200GPAm4EML products are under development, 200GPAm4EML R&D progress is in line with expectations, 100GPAm4EML products have been sent to customers in the sample stage, in the overseas data communication market under the high elasticity of high-speed optical modules, the company accelerated the expansion of overseas markets, in addition to product technology benchmarking, the company announced the establishment of overseas subsidiaries in Singapore, through the establishment of overseas subsidiaries The purpose is to better get close to customers, timely respond to the needs of customers in different regions around the world, and is conducive to further expanding overseas markets, optimize the allocation of overseas production resources, and promote the development direction of internationalization.
Investment suggestion: We believe that the company, as a leader in domestic high-speed optical chip technology, will benefit from the growth of optical module shipments at home and abroad in 2024 and the growth rate of overseas business brought by advanced technology, and has strong growth elasticity, and it is expected that the company will achieve a net profit attributable to the parent company of 048/1.12/1.7.6 billion yuan, a year-on-year increase of -523%/134.4%/57.0% compared to 056/1.32/2.08 yuan, corresponding to PE234 100 64 times, covered for the first time, given a "recommended" rating.
Risk warning: the risk of technology upgrade and iteration, the risk of failure of new product research and development, the risk of gross profit margin fluctuation and performance less than expected, and the business expansion of high-speed optical chips in the data communication market is less than expected.
*According to the calculation of the research report data released in the past three years, the research team of Huatai ** Yu Yi has conducted in-depth research on the stock, and the average accuracy of the past three years is 7997%, its **2023 attributable net profit is 45.63 million, and the **PE converted according to the current price is 24533。
The latest profit** breakdown is as follows:
A total of 11 institutions have rated the stock in the last 90 days, with 7 ratings ** and 4 overweight ratingsThe average institutional price target over the last 90 days is 24247。
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