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Public company info - O-Net Technologies (Group) Limited , 00877.HK
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O-Net Technologies (Group) Limited, 00877.HK - Company Profile
Chairman NA Qinglin
Share Issued (share) 834,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Telecomm. & Networking Equipment
Corporate Profile Business Summary: The group is principally engaged in the design, manufacturing and sale of optical networking subcomponents, components, modules and subsystem used in high-speed telecommunications and data communications (the “Listing Business”). In 2019, the Group acquired API Group which is principally engaged in the research, development, manufacturing and sale of innovative chips and laser products for telecommunications and data communications. Performance for the year: For FY2019, the Group reported revenue of HKD2,581.0 million, representing an increase of HKD64.6 million, or 2.6%, compared with that of HKD2,516.4 million in FY2018. The gross profit in FY2019 was HKD750.3 million, representing a decrease of HKD37.7 million, or 4.8%, from the gross profit of HKD788.0 million in FY2018. Business Review： Demand for optical networking components appears to have bottomed in the second half of 2019. Major telecommunication operators have indicated that they will begin significant investments in 5G infrastructure, with Japan and Korea leading the way. Despite the recent COVID-19 outbreak, it is still expected that, unlike previous iterations, the 5G investment cycle will start in Asia with signs that major Chinese operators may roll out deployments in 2020. Unlike the 4G cycle, the 5G cycle is likely to happen more gradually and over a longer period of time, which may improve the Group’s visibility into future demand. For example, while China may deploy 5G as early as 2020, this will likely only be available in tier-1 cities, while tier-2 and tier-3 cities may not have 5G for many years to come. This progressive rollout of 5G will smooth out demand and may reduce the Group’s earnings volatility. Due to the hardware requirements of 5G, infrastructure density will likely increase, creating opportunities for optical component manufacturers to boast volumes. Optical Networking Business In FY2019, the Group’s optical components business maintained modest growth by leveraging its core technologies and customer relationships. Despite relatively weak industry-wide demand during the year, the Group has duly seized opportunities resulting from both the telecommunications and data-communications sectors, and generated revenue of HKD2,181.7 million, up 4% year-on-year. Optical networking remains the Group’s core business, representing 85% of total revenue. Industrial and Sensing Businesses The Group’s advanced technological platforms enable it to deliver products and services to customers from different industries, including those engaged in (i) the machine vision business; (ii) the automation solutions business for E-cigarettes; (iii) the industrial laser business; (iv) the LiDAR business; and (v) the consumer electronics business. Machine Vision Business The Industry 4.0 initiative ushered in during 2015, has brought immense opportunities to the automation and sensing sectors in China. For its part, in FY2015, the Group rolled out its first machine vision system, and has continued to invest and expand its product portfolio here. Buoyed by strong demand from mainland China, sales of this product increased by 21% year-on-year, contributing HKD52.9 million in revenue to the industrial applications businesses in FY2019. Automation Solutions Business for E-cigarettes As a leading supplier of the E-cigarette industry by virtue of supplying heating coils and automated E-liquid filling & assembly machines, the Group continued to provide a series of automation solutions for the E-cigarette manufacturing industry. Capitalising on strong demand and the Group’s longstanding relationships with several major E-cigarette makers in China and overseas, its E-cigarette business recorded a year-on-year growth of 10% and generated revenue of HKD105.4 million for the year. Industrial Laser Business Since 2015, the Group has successfully tapped the industrial laser industry through the acquisition of ITF Technologies Inc. (“ITF”), a leading supplier of ultra-reliable fiber-optic components, such as Fiber Bragg Grating (FBG) and high-power fused components and modules for fiber laser systems, which has addressed several applications for industrial fiber lasers across the different power and wavelength spectra, including macro/micro material processing, marking and engraving, and welding applications since 2006. Capitalising on ITF’s innovations and the synergies after the acquisition, the Group was able to significantly expand its offerings in multi-kilowatt applications by offering a class-leading 2-kilowatt laser engine and 6-kilowatt laser combiners, as well as discrete optical components capable of handling 3 kilowatts of power each. As a result, the Group generated HKD175.9 million in revenue from the industrial laser business in FY2019 which represented a growth rate of 15% in sales over the prior year. LiDAR Business ADAS is believed to represent one of the most significant technologies to affect the evolution of the automobile while LiDAR is among the key solutions for making high resolution images or maps used by ADAS for autonomous vehicles. By 2022, the value of the LiDAR market is projected to be USD5.2 billion according to estimates, achieving a CAGR of 25%. This significant growth will be driven by the rise in automated and highly automated vehicles expected to be on the road in less than ten years’ time. To capitalise on such growth, the Group has established a production line for the assembly of laser source modules for LiDAR, and its optical components for the laser source module of LiDAR, which have also been qualified by a global technology giant. Furthermore, it is pursuing cooperative ties with other LiDAR players and securing additional customers. Despite these longer term opportunities, the LiDAR business is still at very early stages, where commercial adoption is still being tested. The gradual adoption of this new technology translated to a lighter-than-expected sales volume for 2019, generating revenue of HKD11.0 million for the year, down 53% over the preceding year. Consumer Electronics Business Although consumer electronics are expected to grow over the next several years, the rate of growth slowed in 2019 with the delay of new smartphone models entering the market. Major phone makers are waiting for investments in 5G infrastructure to release 5G compatible phone models during 2020 and 2021. The Group expects the smartphone supply chain to bottom out in the first half of 2020 as it continues a trend of declining sales which began in the first half of 2018. For the fiscal year ended 2019, consumer electronics revenue declined 44% to HKD54.1 million. Prospects: In the beginning of 2020, the world has been overwhelmed by the COVID-19 outbreak (the “Epidemic”), which might have certain degrees of economic concern over the world. O-Net’s operations in Shenzhen was moderately affected in accordance to the government authorities’ various emergency public health measures to control the spread of the Epidemic, which caused a short delay in the resumption of work of the Group’s Shenzhen plant. Nevertheless, with O-Net’s strong technology powerhouse presence around the globe, the impact of the Epidemic is relatively mild on the Group’s business and the impact on the telecommunications sector is believed to be temporary. Going forward, with numerous opportunities arising from different technology initiatives, the Group will continue to make further advances in most of its businesses. In respect of the optical networking business, it will introduce the next generation of innovative products to seize opportunities from the fast-evolving optical components market, particularly the cloud data center and 5G mobile market. As for the new businesses, the Group envisages its various sectors will steadily grow to become significant businesses, driven by the advent of its core technologies. The Group is more optimistic about developments on the machine vision systems, fiber laser systems and LiDAR fronts as each of these businesses will serve as catalysts for its progress and growth. Optical Networking Business Underpinned by innovation, the optical networking business was able to maintain growth during the past year. Going forward, the Group remains highly optimistic with the imminent rollout of 5G communications. Over the next decade, 5G is expected to penetrate most major cellular markets, providing a steady demand for the Group’s core products. Unlike 2019, which witnessed a bottoming of the global telecommunications investment cycle, 2020 is expected to be the start of a much larger communications infrastructure upgrade and a longer period of capital expenditure. This tail wind will enable the Group to advance into new technologies and improve its product line to better meet customers’ demands. Chief among these new products for 2020 include a broader range of active optical components as well as new transport modules, including ROADMs and smaller form factor optical amplifiers. Industrial and Sensing Businesses The Group’s industrial and sensing businesses, which accounted for 15% of total revenue in 2019, achieved mixed results in 2019. Some business divisions, such as Machine Vision, continue to exceed the Group’s expectations, as it expands to new markets and new geographies. Furthermore, while China’s automation industry is projected to be valued at approximately USD100 billion in 2020 according to an estimate, a large number of local Chinese enterprises continue to operate facilities from past industrial stages, hence the window of opportunity is immense. Especially in light of the recent Epidemic, the Group looks to build on its success by providing automation solutions, as well as offering machine vision systems and sensing products. The development of such products began in 2013, with products launched in 2015, and continuing to expand through a new series of products to tap the opportunities generated by the trend towards Industry 4.0 in order to further penetrate the intelligent, digitalised and networked manufacturing market. O-Net, along with ITF, continues to develop the key optical components necessary for the successful deployment of cost-effective and high performance LiDAR solutions. The Group is committed to continue the development of next-generation laser source modules for 1550 nm LiDAR at a lower price point thereby making ADAS a more cost-effective proposition to members of the automotive industry. The Group is confident that by leveraging its advanced LiDAR components and cost-effective laser source module for LiDAR, this business can serve as an additional revenue stream that can drive its overall revenue growth in the future. In addition, by leveraging ITF’s existing technology platforms and manufacturing capabilities, the Group continues to develop and launch new solutions for high power fiber lasers. The global fiber laser market is expected to reach USD3.1 billion by 2022. To address this market, the Group will continue to leverage its unique position by offering a broad range of fiberbased components and systems necessary for fiber lasers – both for high-power and lowerpower fiber laser applications. Coupled with the ongoing development and introduction of additional components and modules for multi-kilowatt fiber lasers, the Group is positioning itself as a key enabler in the transition to include metal cutting, welding, as well as marking and engraving and additive manufacturing. This expansion of uses for fiber lasers continues to provide supplementary avenues for growth – the use of such lasers for micro-drilling and additive manufacturing offers additional outlets for the Group’s broad base of discrete optical components, as well as mid-to high-power fiber laser systems. On this front, the Group expects to continue to outpace the market growth rate. The revolution that is taking place in the manufacturing and production industry brought upon by Industry 4.0 initiatives is set to have a significant and positive impact on the automation and digitalisation industries in the coming years and beyond. Leveraging the Group’s position as a leader in industrial automation, automated electronic cigarette solutions continue to be an important growth area. The Group remains confident that the recent downturn in certain electronic cigarette markets is only temporary and that policy makers will eventually recognize the benefits of electronic cigarettes over traditional tobacco cigarettes. The Group has made adjustments of staff on business units and its cost reduction programme in response to the decline of its coating for mobile phone business, i.e. the Consumer Electronics division. The operation scale has been reduced to a minimum level in order to avoid similar operation loss as in 2019. The Group believes the division is in a much better situation in terms of operational flexibility and efficiency, which should enable it to address future sharp cyclical changes in the industry.

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