Summary of the Conference Call for Shijia Photonics Company Overview - **Company**: Shijia Photonics - **Industry**: Data Communication and Optical Components Key Points and Arguments 1. **Financial Performance**: Shijia Photonics successfully transformed into the data communication market, achieving profitability with a quarterly profit of 20 million yuan. The total profit for the first three quarters of 2025 reached 306 million yuan, although the growth rate in Q3 showed a decline compared to Q2. A recovery is expected in Q4 [2][4][10] 2. **AWG Business**: The Arrayed Waveguide Grating (AWG) business benefits from the demand for wavelength division multiplexing in data center optical modules, particularly excelling in the FR solution. The penetration rate is continuously increasing, with Shijia Photonics having achieved mass production of 1.6T AWG products, capturing approximately 50% of the domestic market [2][6][11] 3. **NPO Business**: The NPO (High-Density Wiring) business focuses on interconnections between data center switches. Following the acquisition of Foxmar, Shijia Photonics aims to enhance gross margins and accelerate overseas growth. The company is expected to improve its competitive position in the NPO market [2][7][11] 4. **CW Light Source Business**: The Continuous Wave (CW) light source business is projected to achieve significant breakthroughs by 2026. The global supply-demand gap for CW light sources is widening, providing opportunities for Shijia Photonics to increase its market share. The company has accumulated technology and sufficient MOCVD equipment to handle a large volume of orders [2][8][9][11] 5. **Growth Potential**: All three core business lines (AWG, NPO, CW light source) exhibit high growth potential, with a conservative estimate of net profit exceeding 1 billion yuan next year. These segments not only support current performance but also prepare for new demands in CPU scenarios [3][10] Additional Important Insights 1. **Market Dynamics**: The AWG business is expected to grow faster than the overall 800G market due to increasing downstream demand and higher silicon photonics penetration [11] 2. **Strategic Acquisitions**: The acquisition of Foxmar is anticipated to enhance Shijia Photonics' gross margins and facilitate overseas expansion, addressing the competitive landscape in the NPO sector [7][11] 3. **Technological Advancements**: Shijia Photonics has made significant technological advancements in CW light sources, positioning itself to capitalize on the growing global demand and supply gap [8][9][11]

Group 1: Company Analysis - Shijia Photon - The report indicates a downward revision of profit forecasts for Shijia Photon, maintaining a target price of 75.20 CNY and a buy rating, with a projected EPS of 0.91, 1.78, and 2.28 CNY for 2025-2027 [2][3] - In Q3, Shijia Photon reported a revenue of 5.68 billion CNY, a year-on-year increase of 102.50%, but a quarter-on-quarter decline of 32.71% in net profit, attributed to product structure adjustments [3] - The company is well-positioned in the growing optical module market, with a focus on AWG, MPO, and DFB products, which are expected to benefit from sustained industry demand [3] Group 2: Company Analysis - Yiwei Lithium Energy - Yiwei Lithium Energy has seen strong demand for dynamic storage, leading to an upward revision of profit forecasts for 2026-2027, with projected EPS of 2.19, 3.65, and 4.36 CNY [4][34] - The company reported a revenue of 450.02 billion CNY for the first three quarters of 2025, a year-on-year increase of 32.17%, with a net profit of 28.16 billion CNY [35] - The report anticipates a continued increase in gross margins in Q4, driven by full production and sales in the energy storage sector [6][34] Group 3: Industry Analysis - Textile and Apparel - The luxury goods sector exceeded expectations in Q3 2025, with notable growth in North America, while the overall retail sales in China showed a slight improvement [8][9] - Major luxury brands like LVMH and Hermès reported revenue growth, indicating a recovery in consumer spending, particularly in the North American market [9] - The report highlights a cautious optimism for Q4, with expectations of a high baseline for the industry, suggesting a potential for continued growth despite previous challenges [9] Group 4: Industry Analysis - Optional Consumer Goods - The report emphasizes a clear upward trend in the tobacco industry, driven by supply-demand dynamics, with major international tobacco companies accelerating their market presence [13][16] - New product categories like heated non-combustible tobacco and e-cigarettes are gaining traction, with expectations of high profit margins and market growth [14][15] - The competitive landscape remains concentrated among major players, with low barriers to entry but significant market share held by established international tobacco companies [15]

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Insights - The company continues to benefit from the high demand in the data communication market driven by AI computing infrastructure, with a dual-platform layout of "passive + active" under the IDM model [3][10]. - The core products, AWG and MPO, are experiencing significant growth, while the CW DFB laser chip has completed customer validation and is in small batch production [3][10]. - Short-term profit fluctuations do not alter the long-term positive trend, as product structure optimization and economies of scale are expected to enhance profitability [3][10]. Financial Performance Summary - For the first three quarters of 2025, the company achieved revenue of 1.56 billion yuan, a year-on-year increase of 114.0%, and a net profit attributable to shareholders of 300 million yuan, up 727.7% year-on-year [3][10]. - In Q3 alone, revenue reached 570 million yuan, reflecting a year-on-year growth of 102.5% and a quarter-on-quarter increase of 2.0% [3][10]. - The gross margin for Q3 decreased by 6.3 percentage points to 29.7%, while the net profit margin dropped by 7.6 percentage points to 14.6% due to structural changes in product mix [10]. Operational Efficiency and R&D - The company is focused on cost reduction and efficiency improvement, with a significant reduction in sales, management, and financial expense ratios [10]. - R&D investment in Q3 reached 36.33 million yuan, a year-on-year increase of 38.6%, representing 6.4% of revenue, indicating a strong commitment to innovation [10]. Product Development and Market Position - The company is advancing its platform layout, with passive products showing resilience and active business gaining momentum [10]. - Key developments include the completion of the 1.6T AWG chip and components, sufficient MPO orders, and the small batch delivery of high-temperature FAU for silicon photonics automation packaging [10]. - The CW DFB laser chip has also completed customer validation and is moving towards increased production capacity [10]. Future Profitability Projections - The company forecasts net profits of 436 million yuan, 703 million yuan, and 1.002 billion yuan for 2025, 2026, and 2027, respectively, with corresponding year-on-year growth rates of 571%, 61%, and 43% [10].

Core Viewpoint - The stock price of Shijia Photonics (688313.SH) closed at 54.44 yuan, reflecting a decline of 18.58% [1] Group 1: Business Performance - According to a report by researchers Liang Chengjia and Luo Jiacheng from China Merchants Securities, the demand for computing power construction has surged, with passive businesses such as AWG and MPO driving the company's performance growth [1] - The report suggests that breakthroughs in active businesses like CW could further enhance the company's growth trajectory [1] - The completion of the acquisition of Fokexima is expected to contribute positively to profit margins [1] Group 2: Financial Projections - Revenue projections for Shijia Photonics are estimated to be 2.29 billion yuan, 3.61 billion yuan, and 5.29 billion yuan for the years 2025, 2026, and 2027, respectively [1] - Corresponding net profits for the same years are forecasted to be 499 million yuan, 910 million yuan, and 1.345 billion yuan [1] - The price-to-earnings (PE) ratios are projected to be 61.4 times, 33.7 times, and 22.8 times for the years 2025, 2026, and 2027, respectively, maintaining a "strongly recommended" rating [1]

Investment Rating - The investment rating for the company is "Buy" (maintained) [7] Core Views - The company has achieved significant growth in its integrated platform, with both active and passive R&D efforts progressing simultaneously [2] - In the first half of 2025, the company's revenue from optical chips and devices reached 699.99 million yuan, a year-on-year increase of 190.92% [4] - The company is expected to benefit from the growing demand for AI computing power, with products like FA, CW light sources, MT connectors, and EML lasers driving further growth [4][17] Summary by Sections Financial Performance - In the first half of 2025, the company reported total operating revenue of 993 million yuan, a year-on-year increase of 121.12%, and a total profit of 226 million yuan, up 1352.13% [13] - The net profit attributable to the parent company reached 217 million yuan, reflecting a year-on-year growth of 1712.00% [13] Business Development - The company has established a complete optical module industry chain through the synergy of "passive + active" optical chips and devices, with significant revenue contributions from AWG and optical fiber connector jumpers [14] - The company announced plans to acquire 82.38% of Fokexima's equity, which is expected to enhance the stability of MT connector supply and improve the product system [16] R&D Achievements - The company has made notable breakthroughs in silicon photonics, 1.6T, and CPO scenarios, with small batch shipments of various products [15] - The development of CWDM4 100G EML lasers and other related products has been successfully completed [15] Earnings Forecast - The company is projected to achieve operating revenues of 2.206 billion yuan, 3.247 billion yuan, and 4.061 billion yuan for 2025, 2026, and 2027, respectively, with year-on-year growth rates of 105.32%, 47.16%, and 25.07% [17][18] - The net profit attributable to the parent company is expected to reach 477 million yuan, 705 million yuan, and 939 million yuan for the same years, with growth rates of 635.00%, 47.68%, and 33.17% [17][18]

Summary of the Conference Call for Shijia Photonics Company Overview - **Company**: Shijia Photonics - **Acquisition Target**: Dongguan Foxima, acquiring 82.3% of shares to enhance technical strength and market competitiveness [2][3] Key Points and Arguments - **Acquisition Purpose**: The acquisition aims to address the MPX chip shortage and enhance the long-term competitiveness of the MPO business by securing production capabilities for MTX chips [2][6] - **Financials of Foxima**: As of Q1 2025, Foxima reported revenues of 82.57 million yuan and a net profit of 30.68 million yuan [2][3] - **Shareholding Structure**: The shareholding arrangement considers the cyclical holding issues of the optoelectronic fund and the willingness of minority shareholders to support long-term development [2][5] - **Production Capability**: The acquisition will allow Shijia Photonics to gain production process capabilities for MTX chips, ensuring a stable supply and reducing overall product costs [6] - **Competitive Position**: Foxima is a leading domestic supplier of METX chips, with competitive product matrix and technical capabilities compared to overseas rivals, though it faces challenges in customer certification and talent retention [7] Industry Dynamics - **Market Demand**: The demand for AWG and MPO businesses remained stable in Q2, with Shijia Photonics maintaining a strong performance despite tariff pressures [4][9] - **Tariff Impact**: New tariffs imposed by the Trump administration on Southeast Asian countries are expected to have a minimal impact on Shijia Photonics, as clients can apply for exemptions [12] - **Supply Chain Stability**: The company has not faced significant material supply issues in Q2, with good collaboration with fiber and cable manufacturers [15] Additional Insights - **Cost Optimization**: While specific quantitative data on cost optimization from the acquisition is not available, the synergy effects are expected to gradually reflect in gross margins [8] - **Future Developments**: The company is actively working on audits and evaluations related to the acquisition, with updates expected in August [10] - **Product Development**: Shijia Photonics is progressing well with its core product AWT, with healthy demand and production ramp-up [17] - **Market Coverage**: The company currently does not have a systematic focus on the new 800G MWDM demand [18] This summary encapsulates the key aspects of Shijia Photonics' conference call, highlighting the strategic acquisition, financial performance, industry dynamics, and future outlook.

Summary of the Conference Call for Shijia Photonics Company Overview - **Company**: Shijia Photonics - **Industry**: Optical Communication Key Points and Arguments Production and Capacity Expansion - The Thai factory of Shijia Photonics is expanding production in an orderly manner, with capacity gradually being released in Q2. Domestic expansion is also ongoing to meet increasing market demand [2][4] - The company has strategically stocked materials to mitigate supply shortages, including fiber optics and connectors, ensuring optimistic growth in overall performance for Q1 and Q2 [3] Demand and Market Trends - Significant growth in demand for optical modules is expected next year, particularly for FR2 and FR4 products, with a stable and optimistic supply situation for AWG components [2][8] - The data center construction is driving an increase in high-margin multi-core optical cable orders, with good performance in Q1 and growth in both gross profit and revenue [2][14] Financial Performance - The company reported a loss in Q1 but expects to narrow losses or achieve breakeven in Q2, contingent on successfully transitioning to three-inch indium phosphide substrates and price increases for 2.5G DFB products [2][11] - The traditional 2.5G DFB market is expected to remain flat compared to last year due to capacity constraints, with a gradual shift to three-inch wafers anticipated to improve capacity over time [10] Strategic Developments - The company has made breakthroughs with strategic large customers, particularly overseas component suppliers, with increasing demand for MPO products [2][5] - Continuous recruitment and training of personnel are being conducted to support MPO business development, with production lines operating in shifts to maximize output [2][27] Future Outlook - Over the next three years, the market demand for 800G optical modules is projected to grow significantly, with AWG product penetration expected to increase [2][26] - The company is optimistic about the future, particularly in the CW business, with incentive programs in place to enhance yield and gross margins [9] Challenges and Risks - The company faces challenges in the traditional access network business, where profitability remains difficult if it continues to focus on 2.5G products. A shift towards 10G or 25G products is seen as a more favorable direction [11] - The impact of tariffs on various business segments is minimal, as the company has the ability to switch production origins to benefit from exemption policies [6][7] Additional Insights - The AWG component's gross margin is expected to improve as production scales up, with lower equipment amortization costs contributing to higher profitability [18] - The company is cautious about expanding production capacity blindly and will evaluate the situation based on order demand [22][25] Conclusion - Shijia Photonics is positioned for growth in the optical communication sector, with strategic expansions, a focus on high-demand products, and a commitment to improving financial performance through operational efficiencies and market adaptations [2][28]

Core Viewpoint - The company reported strong financial performance for 2024, with significant year-on-year growth in revenue and net profit, and a stable start to 2025, indicating robust operational momentum [1][5]. Financial Performance - In 2024, the company achieved revenue of 3.25 billion yuan, a year-on-year increase of 67.7%, and a net profit attributable to shareholders of 1.34 billion yuan, up 84.1% [1]. - For Q4 2024, the company recorded revenue of 860 million yuan, with quarter-on-quarter growth of 17.0% and year-on-year growth of 2.2%, and a net profit of 370 million yuan, reflecting quarter-on-quarter growth of 26.2% and year-on-year growth of 13.9% [1]. - In Q1 2025, the company generated revenue of 950 million yuan, with quarter-on-quarter growth of 29.1% and year-on-year growth of 10.2%, while net profit was 340 million yuan, showing quarter-on-quarter growth of 21.1% but a year-on-year decline of 8.0% [1]. Product Line Performance - In 2024, the company’s active and passive product lines generated revenues of 1.66 billion yuan (up 121.9% year-on-year) and 1.58 billion yuan (up 33.2% year-on-year), respectively [2]. - The demand for passive components surged due to the AI data communication market, although certain telecom markets faced pressure [2]. - The company is focusing on high-speed data communication and silicon photonics products, with improvements in cost optimization and yield, leading to an 8.2 percentage point increase in passive gross margin compared to 2023 [2]. Strategic Developments - The company has commenced production at its Thailand factory, which is strategically positioned in the upstream of the optical module supply chain, minimizing the impact of tariff fluctuations [3]. - The Thailand factory has successfully passed customer certification for certain passive component product lines, with plans for expansion underway [3]. - The company is developing customized passive components and enhancing its capabilities in silicon photonics, which is expected to open up larger market opportunities [3]. Market Position and Future Outlook - The company is a key participant in the supply chain for NVIDIA's CPO, which is anticipated to drive new growth as the market expands [4]. - NVIDIA's CPO switches are projected to significantly reduce energy consumption and improve network reliability, with the CPO market potentially reaching $5 billion by 2030 [4]. - The company has begun small-scale deliveries of high-power lasers suitable for CPO applications, indicating readiness to capitalize on market opportunities [4]. Profit Forecast - The company expects a significant rebound in active business growth in the second half of the year, with projected net profits of 2.08 billion yuan, 2.88 billion yuan, and 3.24 billion yuan for 2025-2027, respectively [5]. - Corresponding EPS estimates are 3.75, 5.19, and 5.84 for the same periods, with the current valuation at a historical low [5].

Investment Rating - The report maintains a "Buy-A" rating for the company, indicating an expected price increase of over 15% relative to the benchmark index [1][8]. Core Insights - The company has demonstrated robust operational performance, with a significant revenue increase of 67.7% year-on-year in 2024, reaching 3.25 billion yuan, and a net profit growth of 84.1%, amounting to 1.34 billion yuan [1][10]. - The first quarter of 2025 shows continued growth, with revenues of 950 million yuan, reflecting a 29.1% quarter-on-quarter increase, although net profit decreased by 8.0% [1][10]. - The company is positioned to benefit from the growing demand for its 1.6T and CPO products, with expectations of substantial revenue contributions from these segments in the near future [3][7]. Financial Performance Summary - In 2024, the company achieved revenues of 3.25 billion yuan, with a year-on-year growth of 67.7%, and a net profit of 1.34 billion yuan, up 84.1% [1][10]. - The revenue forecast for 2025 is projected at 5.21 billion yuan, with a year-on-year growth of 60.1%, and net profit expected to reach 2.08 billion yuan, reflecting a growth of 55.1% [10][12]. - The gross margin is anticipated to improve, with a forecast of 56.7% for 2025, compared to 57.2% in 2024 [10][12]. Market Position and Strategic Advantages - The company is a key player in the supply chain for Nvidia's CPO products, which are expected to drive new growth as the market expands [7]. - The establishment of a factory in Thailand enhances the company's position in the silicon photonics supply chain, allowing for reduced tariff impacts and increased production capabilities [4][7]. - The company is focusing on high-speed data communication and silicon photonics products, which are expected to see increased demand due to the growth of AI and data communication markets [3][4].

Investment Rating - The report maintains a "Buy-A" rating for the company, indicating an expected price increase of over 15% relative to the benchmark index [1][5]. Core Insights - The company achieved a revenue of 3.25 billion yuan in 2024, representing a year-on-year growth of 67.7%, and a net profit of 1.34 billion yuan, up 84.1% year-on-year [1]. - The first quarter of 2025 showed steady operations with a revenue of 950 million yuan, a quarter-on-quarter increase of 29.1%, and a net profit of 340 million yuan, reflecting a year-on-year growth of 21.1% [1]. - The company is positioned as a key player in the silicon photonics supply chain, with its Thai factory now operational and expanding production capabilities [3][4]. Financial Performance - In 2024, the company’s active and passive product lines generated revenues of 1.66 billion yuan (up 121.9% year-on-year) and 1.58 billion yuan (up 33.2% year-on-year), respectively [2][5]. - The projected net profits for 2025, 2026, and 2027 are 2.08 billion yuan, 2.88 billion yuan, and 3.24 billion yuan, respectively, with corresponding EPS of 3.75, 5.19, and 5.84 [5][7]. - The gross margin is expected to improve, with a forecast of 56.7% in 2025, up from 54.3% in 2023 [7][9]. Market Position and Growth Drivers - The company is a significant participant in the CPO supply chain for NVIDIA, which is expected to drive new growth as the market expands [4]. - The demand for passive components is anticipated to surge due to the AI data communication market, despite some pressure in traditional telecom markets [2][3]. - The company’s unique position in the silicon photonics industry, along with its partnerships and product offerings, is expected to facilitate market expansion [3][4].