Yuanjie Semiconductor posts strong 1H26 profit alert; Nomura maintains Neutral and CNY1,655 target price

Overview

This is a Nomura equity quick take on Yuanjie Semiconductor Technology. The core event was the company's release of a positive profit alert after market close on July 21, 2026, along with an analyst call held the same day. The report interprets the strong 1H26E revenue and profit guidance as evidence of robust demand for optical laser chips in the AIDC market, and believes high-end 800G/1.6T optical module demand continues to support the industry's upward cycle.

Core views

Nomura maintains a Neutral rating and CNY1,655 target price. Positive factors include strong 1H26E profit growth, margin expansion driven by datacom and telecom product upgrades, volume ramp-up of 70mW/100mW CW lasers, potential first-mover advantage of UHP CW lasers for NPO/CPO demand, and capacity expansion of 100G EML that could quickly boost shipments in 2H26E. Cautious factors include the stock's recent high valuation, the pace of product upgrades, pricing power after industry capacity expansion, and potential competitive impacts.

Analysis framework

The report uses an event-driven interpretation of the profit alert combined with validation from management's analyst call, focusing on comparisons of the company's guided year-on-year growth, implied 2Q26E revenue and profit performance, and assessing earnings quality and the sustainability of industry prosperity through product mix, the capacity expansion cycle, pricing stability, and downstream optical module demand.

Methodology notes

• Valuation methodsP/E multiple valuation

  Target price based on 65x FY28F EPS

  Nomura's CNY1,655 target price is based on 65x 2028F EPS of CNY25.47, in line with the median P/E of the WIND China A-share optical laser industry.

• Rating systemRelative benchmark rating

  Neutral

  Nomura's Neutral indicates the analyst expects the stock to perform broadly in line with its benchmark over the next 12 months; the benchmark index in this report is the CSI300.

• Industry demand analysisProduct upgrades and supply-demand assessment

  High-end optical modules drive demand for optical laser chips

  Through demand for 70mW/100mW CW lasers, UHP CW lasers, 100G EML, and 800G/1.6T optical modules, the report assesses the sustainability of the company's margin and revenue growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Yuanjie Semiconductor Technology 688498.SS / 688498 CH

  covered target

  Strengths

  Strong 1H26E profit alert; datacom and telecom product upgrades drive margin expansion; 70mW/100mW CW lasers become the main drivers; UHP CW lasers and 100G EML provide follow-on growth options.

  Weaknesses

  The market is recently concerned about elevated valuation, slowing product upgrades, and the possibility that industry capacity expansion may weaken pricing power.

  Comparison

  The stock price has fallen about 16% over the past week, versus about 14% for the Shanghai STAR 50 Index over the same period; the target price implies about 9.6% upside versus the July 21, 2026 closing price.

  Risks

  Weaker-than-expected optical module demand, weaker-than-expected NPO/CPO penetration, supply chain diversification by core customers, and geopolitical risks.

• China A-share optical laser chip sector

  valuation and industry cycle reference

  Strengths

  Demand for high-end 800G/1.6T optical modules remains strong, and core laser products are still in short supply.

  Weaknesses

  Rapid industry capacity expansion may trigger concerns over oversupply and price competition.

  Comparison

  The target price uses 65x FY28F EPS, in line with the median P/E of the WIND China A-share optical laser industry.

  Risks

  Effective capacity expansion cycles, competitor entry, price declines, and downstream demand volatility.

Key data

• 1H26E revenue guidanceCNY900-950mnYear-on-year growth of +339.1-363.5%.
• 1H26E profit guidanceCNY600-650mnYear-on-year growth of +1,196.9-1,305.0%.
• Implied 2Q26E revenueCNY545-595mnYear-on-year growth of +352-393%.
• Implied 2Q26E profitCNY421-471mnYear-on-year growth of +1,217-1,373%.
• Target priceCNY1,655.00Based on 65x FY28F EPS of CNY25.47.
• Closing priceCNY1,510.00Closing price on July 21, 2026.
• RatingNeutralRating remains unchanged.

Impact & implications

The investment implication of the report is that the profit alert strengthens confidence in the long-term demand uptrend for optical laser chips, especially along the AIDC-driven high-end 800G/1.6T optical module chain; however, since the rating remains Neutral, Nomura has not translated the strong profit alert into a more positive stock rating, indicating that valuation and industry supply risks still constrain the risk-reward profile.

Risks

• Optical transceiver market demand is weaker than expected.
• NPO/CPO penetration is weaker than expected.
• Supply chain diversification by leading customers may lead to share or pricing pressure.
• Geopolitical risks.
• Industry capacity expansion outpacing demand may lead to oversupply and price declines.

What to watch

• The pace of 100G EML capacity expansion and shipment ramp-up in 2H26E.
• The sustainability of demand for 70mW and 100mW CW lasers in 1.6T optical modules.
• Commercialization progress of 300mW/400mW UHP CW lasers in NPO/CPO demand.
• Whether core laser product prices can remain stable under undersupply conditions.
• The company's relative performance in valuation versus the CSI300 and STAR Market-related indices.