Goldman Sachs Reiterates Buy on Eoptolink; Target Price Raised to 841 Yuan

Overview

Goldman Sachs released an earnings review report on Eoptolink (300502.SZ), reiterating a Buy rating and raising the 12-month target price from 737 yuan to 841 yuan, implying approximately 19% upside. The report states that the company is in a critical window for the iteration of high-speed optical module products, with 1.6T products entering the mass production ramp phase, and both EML and silicon photonics technology paths advancing simultaneously. Looking ahead to 2027-2028, 3.2T optical modules and 6.4T NPO (Near Package Optics) are set to take over as new growth engines, supporting the company's long-term competitiveness. Based on product mix upgrades and economies of scale, the institution has revised upward its earnings forecasts for the next two years.

Core views

Product iteration and shipment rhythm: Eoptolink's 1.6T optical module solutions began shipping in the first quarter of 2026, with a gradual ramp expected in the second quarter, accelerating in the third and fourth quarters as capacity expands at the Thailand production base. Notably, the company has deployed both EML (Electro-absorption Modulated Laser) and SiPh (Silicon Photonics) technology paths for its 1.6T products. Although supply of 200G/lane EML chips remains tight, the company, leveraging in-house silicon photonics technology acquired through the 2022 acquisition of Alpine Optoelectronics, expects to achieve volume shipments of silicon photonics solutions starting in the second half of 2026 or 2027, effectively mitigating single-supply chain risks. Medium-to-long-term growth drivers: 800G EML optical modules will remain the primary revenue source in 2026, but the revenue contribution of high-speed products (1.6T and above) is expected to increase significantly starting in 2027. Beyond 1.6T, the company is reserving next-generation technologies: 3.2T optical modules based on 400G/lane EML, silicon photonics, or new LNOI (Thin-film Lithium Niobate) materials, as well as 6.4T NPO solutions tailored to CSP customer needs, the latter of which is expected to start contributing revenue in 2027. These new products constitute the core growth pillars for the company in 2027-2028. Earnings forecast revision and valuation: Given the upgrade in product structure towards high-end, Goldman Sachs recalibrated its 2026 earnings model and raised net profit forecasts for 2027 and 2028 by 5% and 6%, respectively. Adjusted 2027E/2028E gross margins each increased by 0.1 percentage points, and operating expense ratios each decreased by 0.1 percentage points, reflecting economies of scale. In terms of valuation, the target P/E was raised from 26.0x to 28.4x (corresponding to 2027E), aligning with the company's average forward P/E of approximately 28x since 2018, leading to the new target price of 841 yuan.

Analysis framework

The report adopts an analysis framework of 'product generation tracking + supply chain verification + earnings revaluation'. First, by tracking shipment schedules and technology routes (EML vs SiPh vs LNOI) for key products like 1.6T, 3.2T, and 6.4T NPO, it assesses the company's growth cadence. Second, it cross-validates the authenticity of capacity ramping and upstream stockpiling efforts by combining changes in inventory and prepayments on the balance sheet (e.g., 1Q26 inventory rose to 9.0 billion yuan, prepayments increased to 682 million yuan). Finally, it translates product mix upgrades into specific adjustments for revenue, gross margin, and expense ratio assumptions, deriving the target price via the P/E valuation method. This transmission chain from micro-level operational data to macro-level earnings models is a typical method for analyzing the cyclical conditions of high-tech manufacturing companies.

Methodology notes

• Industry/Industrial Analysis FrameworkPenetration Rate S-Curve

  Shipment ramp rhythm of next-gen optical modules (1.6T/3.2T)

  The optical module industry exhibits distinct generational replacement characteristics, where new products typically follow an S-curve from initial shipment to mass volume ramp. The report focuses on the 'gradual ramp' of 1.6T in 2Q26 and the 'acceleration' nodes in 3Q/4Q, as well as the starting point of revenue contribution from 3.2T/6.4T NPO in 2027, essentially capturing the steepest slope phase of the S-curve.

• Company Fundamentals & Financial FrameworkWorking capital cycle

  Inventory and prepayments as leading indicators for capacity ramp

  For hardware manufacturers, revenue recognition often lags behind stockpiling behavior. The report observed a QoQ increase of 1.8 billion yuan in 1Q26 inventory and a surge in prepayments from 17 million to 682 million yuan, interpreting these working capital changes as forward signals for shipment volume increases in 2Q/3Q, rather than purely inventory accumulation risks. This is a common financial validation method for determining inflection points in manufacturing short-term cycles.

• Valuation MethodPE/PEG valuation

  Anchoring target P/E based on forward earnings growth and margins

  Instead of using a fixed multiple, the report derived a target P/E of 28.4x based on the average net profit growth rate (25%) and average operating margin (33%) for 2027-2028, and performed a reasonableness check against the company's historical average. This approach links valuation multiples to fundamental dynamics, avoiding the distortion of static P/E in pricing high-growth stocks.

Asset mapping & comparison

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

• Eoptolink (300502.SZ)

  Core Beneficiary: Volume ramp of dual-solution 1.6T optical module EML/SiPh; 3.2T and 6.4T NPO new product reserves support medium-to-long-term growth

  Strengths

  1.6T already shipping with dual technology paths; acquired Alpine to gain in-house silicon photonics capability; Thailand capacity expansion guarantees delivery; CSP customer demand drives 6.4T NPO

  Weaknesses

  200G/lane EML chip supply remains tight; 800G remains main revenue driver in 2026, high-speed product mix increase takes time

  Risks

  800G ramp slower than expected; geopolitical impact on supply chain; intensified competition leads to price erosion and margin decline

Key data

• 12-month Target Price841.00 yuanRaised approximately 14% from previous 737 yuan, implying 19% upside
• 2027E Net Profit Forecast Revision2.943 billion yuanRaised 5% from old forecast of 2.816 billion yuan
• 2028E Net Profit Forecast Revision3.375 billion yuanRaised 6% from old forecast of 3.181 billion yuan
• 2027E Target P/E28.4xPreviously 26.0x, close to historical average of 28x since 2018
• 1Q26 Inventory Level9.0 billion yuanIncreased 1.8 billion yuan from 7.2 billion yuan in 4Q25, supporting subsequent ramp
• 1Q26 Prepayments682 million yuanSignificant growth from 17 million yuan in 4Q25, reflecting upstream stockpiling

Impact & implications

For Eoptolink, the mass production of the dual-solution 1.6T and the reserve of next-generation products mean the company is poised to continue gaining share in the global AI computing infrastructure upgrade. In particular, the implementation of in-house silicon photonics capabilities may reduce reliance on external EML chips and enhance supply chain resilience. For the optical module industry, competition among leading manufacturers in the 1.6T phase has shifted from single technical metrics to a comprehensive comparison of multi-path parallel delivery capabilities and overseas capacity layout. The report's upward revision also indicates that market visibility for demand for high-end optical modules is extending from 2026 to 2027-2028.

Risks

• Shipment ramp speed of 800G optical modules lower than expected
• Geopolitical issues may impact the optical transceiver supply chain
• Intensified market competition may lead to product price erosion and margin decline

What to watch

• Ramp progress of 1.6T optical modules in 2Q26 and acceleration in 3Q/4Q
• Actual shipment rhythm of Silicon Photonics (SiPh) solutions in 2H26/2027
• Realization of revenue contribution from 6.4T NPO products in 2027
• Degree of alleviation in supply tightness for 200G/lane EML chips