Operating income in 2023 will decrease by 29.82% year-on-year Changyingtong replied to the inquiry letter: orders will recover significantly in the first quarter of 2024, and it is expected that the annual revenue will increase year-on-year

Reporter: Zhang Mingshuang Editor: Yang Xia

In 2023, the performance of Changyingtong (SH688143, stock price 22.90 yuan, market value 2.811 billion yuan), which has been listed for less than two years, will decline sharply, achieving operating income of 220 million yuan, a year-on-year decrease of 29.82%, and net profit attributable to the parent company of 15.5628 million yuan, a year-on-year decrease of 80.72%. The company disclosed in its annual report that the decline in revenue was mainly due to the reduction or delay in the delivery of military orders from an important military customer.

In this regard, the Shanghai Stock Exchange issued a regulatory inquiry letter on the information disclosure of the company's 2023 annual report (hereinafter referred to as the inquiry letter), requiring the company to list the orders in hand and explain whether there is a risk of further decline in revenue in 2024.

On the evening of May 6, Changyingtong replied to the inquiry letter, saying that as of the end of the first quarter of 2024, the company's orders in hand increased by 109.65% compared with the end of 2023, and the order recovery was more obvious, combined with the first quarter performance, the company expects that the revenue in 2024 will increase compared with 2023. However, the company still warned of "the risk of a significant decline in performance or loss".

The value of new orders has been declining for the second year in a row

Changyingtong is mainly engaged in the research and development, production, sales and service of optical fiber gyroscope core device fiber optic ring and its comprehensive solutions. In 2023, Changyingtong said that the delivery of military orders from an important military customer of the company will be reduced or delayed, resulting in a decrease in the number of fiber ring devices and polarization-maintaining optical fibers in the company's upstream support, and a decrease in sales unit price will lead to a decrease in operating income and total profit.

In addition, due to the increase in the number of employees, the corresponding increase in employee salaries caused a year-on-year increase of 47.75% in management expenses, and strengthened the investment in new products, new technologies and new processes, resulting in a year-on-year increase of 33.09% in R&D expenses, which further affected the company's total profit.

According to the reply to the inquiry letter, from 2021 to 2023, the amount of new orders of Changyingtong will be 326 million yuan, 300 million yuan, and 265 million yuan respectively, which has declined for two consecutive years. In terms of orders in hand, the company's orders in hand at the end of the first quarter of 2024 were 82.2689 million yuan, an increase of 109.65% and 78.57% respectively compared with 39.241 million yuan at the end of 2023 and 46.07 million yuan at the end of the first quarter of 2023.

In the first quarter of 2024, Changyingtong's operating income increased by 147.82% year-on-year, and the net profit attributable to the parent company turned into a profit year-on-year, mainly due to the significant increase in the company's orders for optical fiber ring devices and special optical fibers in the first quarter of 2024 and the increase in the company's purchases. As a result, YT expects revenue growth in 2024 compared to 2023 (which does not constitute a profit forecast). However, Changyingtong also reminded that if there are major changes in the macroeconomic environment, military industry policies, industry competition or costs and other factors in the future, the company's future performance may fluctuate significantly.

In terms of products, Changyingtong's main revenue comes from optical fiber ring devices and special optical fibers, and the two major products will contribute a total operating income of 144 million yuan in 2023. In 2023, the company's fiber ring device revenue will decrease by 47.85% year-on-year, of which the revenue from customer-verified products will account for 72.29% of the fiber ring device revenue, a decrease from 80.37% in 2022. However, Changyingtong believes that the company still has dozens of optical fiber ring device (including optical module) product models in customer verification, and it is expected to become an important source of growth for the company's business revenue after verification and mass production in the future.

In 2023, the company's special optical fiber revenue will decrease by 35.10% year-on-year. In 2022 and 2023, the revenue of polarization-maintaining optical fiber products verified by customers will account for 73.76% and 77.59% of the revenue of self-produced polarization-maintaining optical fiber products, respectively. Changyingtong said that the proportion of products that have passed the verification model in the early stage has increased in 2023, and the company currently has 6 polarization-maintaining optical fiber product models in customer verification, which is expected to continue to bring economic inflow to the company after passing the verification and mass production in the future.

If the purchase of YOFC does not reach the agreed quantity, the margin loss will be recognized

The inquiry letter of the Shanghai Stock Exchange also paid attention to the cooperation agreement between Changyingtong and Changfei Optical Fiber (SH601869, stock price 26.89 yuan, market value 20.380 billion yuan).

For YC, YOFC is both an important supplier and a competitor. In the early days of its establishment, YOFC did not produce polarization-maintaining optical fibers, and mainly purchased polarization-maintaining optical fibers for sales and ring-winding production of YOFC. Since 2015, while continuing to expand the scale of production and sales of optical fiber rings, Changyingtong has independently developed special optical fibers represented by polarization-maintaining optical fibers, and the scale of the company's self-produced optical fiber production and sales applications has continued to increase.

In March 2022, in the face of intensified competition with YOFC, YOFC still signed the "Framework Cooperation Agreement (2022-2025)" with it and agreed on the minimum purchase quantity. In this regard, Changyingtong said that the signing of the long-term cooperation agreement is mainly due to the continuous procurement demand of customers for the raw materials of finalized products, which is conducive to the stability of the company's business, and the purchase volume of polarization maintenance optical fiber in 2020 and 2021 has exceeded the minimum purchase quantity agreed in the agreement, and the purchase price discount can be enjoyed in the case of large quantities, which is commercially reasonable.

In 2023, Changyingtong purchased 0.0049A kilometers of optical fiber from YOFC, which is far from reaching the agreed purchase volume of 5.33A km, mainly due to the decrease in orders for fiber rings using YOFC fiber winding in 2023. As a result, Changyingtong will recognize a performance bond loss of 5 million yuan in 2023.

It is worth noting that as of the end of 2023, the remaining performance bond of YOFC is 10 million yuan, and in the first quarter of 2024, the company has not purchased optical fiber from YOFC. So, is there a risk that the remaining 10 million yuan of performance bond will not be recovered?

Changyingtong replied that the order recovery in the first quarter of 2024 is more obvious, and the company's intended purchase volume of YOFC in the order in hand is 4.07A kilometers, considering that after normal procurement and production, the company expects that the annual order volume can basically reach the cumulative minimum purchase volume of 10.66A kilometers agreed in the agreement, and there is no need for special single provision for bad debts.

National Business Daily