Yuanjie Technology posts strong 1H26 earnings guidance; Nomura maintains Neutral rating

Overview

This report is a company flash comment by Nomura on Yuanjie Technology 688498.SS. The key event is the company's release of 1H26 earnings guidance after market close on July 21, 2026, followed by an analyst conference call. The report believes the earnings guidance significantly exceeded expectations, indicating that demand for optical laser chips driven by AI data centers remains sustainable, especially from high-end 800G and 1.6T optical modules.

Core views

Nomura maintains a Neutral rating, believing Yuanjie Technology benefits from the upcycle in optical communication laser chips, product upgrades in data communications and telecom, and future NPO/CPO-related demand. At the same time, the recent share price pullback reflects market concerns over high valuation, a slower pace of product upgrades, and constrained pricing power after industry capacity expansion. Nomura believes some concerns over oversupply and price cuts may be overstated, as effective capacity expansion takes more than two years and core laser products remain in short supply.

Analysis framework

The report uses an event-driven flash comment approach, combining the company's 1H26E revenue and profit guidance, implied 2Q26E growth, management commentary from the conference call on product mix and capacity cycle, and demand trends in the optical module industry to reassess the rating and target price. The valuation method uses FY28F EPS and comparable P/E multiples for China's A-share optical laser sector.

Methodology notes

• Valuation methodsRelative valuation method

  P/E multiple valuation

  The CNY1,655 target price is based on 65x FY28F EPS of CNY25.47, in line with the median P/E of the WIND China A-share optical laser sector, with CSI300 as the benchmark index.

• Rating systemNomura equity rating system

  Neutral rating

  Neutral means the analyst expects the stock to perform broadly in line with the designated benchmark over the next 12 months.

Asset mapping & comparison

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

• 688498.SS

  Covered company; A-share STAR Market optical laser chip name

  Strengths

  High growth in 1H26E revenue and profit; product mix upgrades in the data communications and telecom markets; 70mW and 100mW CW lasers have become key drivers; management is positive on demand opportunities for UHP CW lasers and NPO/CPO.

  Weaknesses

  The market is concerned about high valuation, a possible slowdown in the pace of product upgrades, and intensifying price competition after industry capacity expansion.

  Comparison

  The report aligns the valuation multiple with the median P/E of the WIND China A-share optical laser sector, with CSI300 as the benchmark index.

  Risks

  Optical module demand misses expectations, NPO/CPO penetration falls short of expectations, supply chain diversification among major customers, and geopolitical risks.

Key data

• 1H26E revenue guidanceCNY900-950mnUp 339.1%-363.5% year over year.
• 1H26E profit guidanceCNY600-650mnUp 1,196.9%-1,305.0% year over year.
• Implied 2Q26E revenueCNY545-595mnUp 352%-393% year over year.
• Implied 2Q26E profitCNY421-471mnUp 1,217%-1,373% year over year.
• Target priceCNY1,655.00Maintained unchanged, based on 65x FY28F EPS of CNY25.47.
• Closing priceCNY1,510.00Price date is July 21, 2026.
• Recent share price performanceDown about 16% over the past weekOver the same period, the SSE STAR 50 Index fell about 14%.

Impact & implications

The strong earnings guidance reinforces the boost from AI data center demand to optical laser chips and alleviates some market concerns over rapid industry supply expansion, falling prices, and slowing product upgrades. If volume ramps for 70mW/100mW CW lasers, UHP CW lasers, and 100G EML materialize, Yuanjie Technology is well positioned to benefit further from upgrades to high-end optical modules such as 1.6T and NPO/CPO; however, the current rating remains constrained by valuation and the competitive cycle.

Risks

• Optical transceiver market demand is weaker than expected.
• NPO/CPO penetration is weaker than expected.
• Supply chain diversification among major customers reduces order concentration.
• Geopolitical risks.
• If global optical module makers' orders are stronger than expected or capacity expansion is faster than expected, this could present upside risk.

What to watch

• The extent to which official 1H26 results and guidance are delivered.
• The pace of 100G EML capacity expansion and shipment ramp-up in 2H26E.
• Progress of 70mW, 100mW, and 300mW/400mW UHP CW lasers in 1.6T and NPO/CPO scenarios.
• Price stability of core laser products and the pace of effective industry capacity release.
• Changes in orders from global optical module makers and AI data center capex trends.