Suzhou Centec (688702)2025-02-02 15:52Investment Rating - The report maintains a "Recommended" rating for the company, indicating an expectation that the stock will outperform the market by 10% to 20% over the next six months [15]. Core Views - The company is a leading domestic Ethernet switch chip manufacturer with significant potential for domestic substitution. It is increasing its investment in high-end chip research and development, which is currently putting pressure on profits [3][11]. - For the fiscal year 2024, the company anticipates revenue between 1.05 billion and 1.10 billion yuan, representing a year-on-year growth of 1.21% to 6.03%. However, it expects a net loss attributable to shareholders of between 85 million and 50 million yuan, which is an increase in losses compared to the previous year [3][8]. - The company is capitalizing on the trends in domestic integration circuits and network communication industries, focusing on high-end chip development while also upgrading mid- and low-end products [8][11]. Financial Summary - Revenue projections for 2024 to 2026 are 1.078 billion, 1.411 billion, and 1.994 billion yuan, respectively, with expected growth rates of 3.9%, 30.9%, and 41.3% [7][12]. - The company is expected to achieve a positive net profit of 46 million yuan in 2025 and 75 million yuan in 2026, following a projected loss of 67 million yuan in 2024 [12][13]. - The gross margin is expected to stabilize around 39% in the coming years, while the net margin is projected to turn positive by 2025 [7][13]. Market Position - The company has established itself as a key player in the domestic Ethernet switch chip market, having developed a comprehensive product line and accumulated leading core technologies since its inception in 2005 [9][11]. - The Ethernet switch chip market is characterized by a high degree of concentration and long product life cycles, which can last 8-10 years, providing the company with a competitive edge [9]. Product Development - The company is focusing on high-performance, flexible, and secure products, with its Arctic series of high-end chips expected to support maximum port speeds of 800G and begin small-scale deliveries in 2024 [8][11]. - The company is also expanding its mid- and low-end product lines to capture the current domestic market opportunities [8].