Nomura maintains Buy on Zhongji Xuchuang and raises target price to CNY1,325

Overview

This report covers Zhongji Xuchuang. The core view is that although the AI infrastructure segment has seen a near-term stock pullback, the fundamental growth drivers for FY26-28F have not changed. Nomura believes that high-end optical communication products remain a key bottleneck in the AI data-center market, and that 1.6T and silicon-photonics module upgrades, NPO/CPO market expansion, and the future 2.4T/3.2T product cycle will continue to support company growth.

Core views

The report maintains a Buy rating and raises the target price to CNY1,325. The analyst believes that although short-term supply-chain bottlenecks remain at upstream InP wafers, MOCVD equipment, and 200G EML, supply tightness may ease from 2028 onward. The company's leading position in high-end optical modules, NPO/CPO, and supply-chain management is expected to be further strengthened, supporting upgrades to revenue, gross margin, and profit forecasts.

Analysis framework

The report adopts a combined approach of top-down AI data-center optical module demand assessment and bottom-up company-level forecasts for shipments, ASP, gross margin, and EPS. In valuation, it applies a 20x FY27F EPS multiple, using FY27F EPS of CNY66.06 to derive a CNY1,325 target price, and aligns it with the median P/E range for Wind's China A-share technology/electronic components sector.

Methodology notes

• Valuation methodsP/E multiple method

  20x FY27F EPS

  The target price is based on FY27F EPS of CNY66.06 at 20x and keeps the multiple unchanged, with reference to the median P/E of Wind's China A-share Technology/Electronic Components sector.

• Earnings forecastShipment, ASP and gross-margin assumptions

  Forecast revisions are driven by product upgrade cycles

  The report raised shipment assumptions for 800G, 1.6T, as well as 2.4T/3.2T optical modules, and reflected product-structure improvement from 1.6T, silicon photonics, and NPO/CPO into revenue, gross margin, and earnings forecasts.

Asset mapping & comparison

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

• Zhongji Xuchuang 300308.SS

  Core coverage stock

  Strengths

  The company maintains leading positions in high-end optical modules, 1.6T/silicon-photonics, 2.4T/3.2T, and NPO/CPO, and is expected to retain 30% to 35% share in the global AI data-center optical module market.

  Weaknesses

  Performance remains affected in the short term by upstream material, equipment, and critical-component supply bottlenecks, and results are sensitive to the pace of high-end product upgrades.

  Comparison

  The report states Nomura's FY26-28F revenue forecast is 32%-67% above Wind consensus expectations and earnings forecast is 14%-38% above, mainly because of more optimistic assumptions on shipment growth, ASP, and gross-margin expansion.

  Risks

  Potential underperformance of high-end optical module demand, intensified competition in 800G/1.6T, slower-than-expected 3.2T and silicon-photonics product upgrades, and heightened price competition affecting exports.

Key data

• Target PriceCNY1,325.00Raised from the prior CNY1,015.00.
• Current Share PriceCNY1,098.92Price date is 2026-07-06.
• Implied Upside+20.6%Calculated based on the target price versus current share price.
• FY27F EPSCNY66.06Used for target-price valuation at 20x P/E.
• Global FY27/28F 800G optical module shipment forecastFY27F 55mn; FY28F 78mnPreviously FY27F 50mn and FY28F 71.5mn.
• Global FY27/28F 1.6T optical module shipment forecastFY27F 71.5mn; FY28F 126mnPreviously FY27F 60mn and FY28F 110mn.
• 2.4T and 3.2T shipment assumptions2.4T: FY27F 2mn, FY28F 5mn; 3.2T: FY28F 2mnThe report newly incorporates high-end product-cycle assumptions.
• Company expected global AI data-center optical module market share30%-35%Attributed to strong R&D capabilities and effective supply-chain management.
• FY27-28F revenue forecast uplift28%-37%Reflects product upgrades and NPO/CPO expansion.
• FY27-28F profit forecast uplift30%-38%Driven by both revenue growth and margin expansion.

Impact & implications

If the report's assumptions are realized, Zhongji Xuchuang is expected to continue benefiting from rapid high-end optical module upgrades in AI data centers and deeper NPO/CPO penetration, with earnings leverage potentially higher than market-consensus expectations. The target-price increase suggests Nomura places greater emphasis on sustained growth after 2027, when high-end product cycles and easing supply-chain bottlenecks are expected to support expansion.

Risks

• Demand for high-end optical modules from data communication and telecom markets may be weaker than expected.
• Competition in 400G, 800G, or 1.6T optical module segments may intensify.
• The pace of 800G, 1.6T, 3.2T, or silicon-photonics product upgrades may be slower than expected.
• Escalating price competition may weaken exports and margins.
• If near-term supply-chain bottlenecks improve more slowly than expected, deliveries and revenue recognition may be pressured.

What to watch

• Actual order pace from AI data-center customers for 1.6T, 2.4T, and 3.2T optical modules.
• Supply recovery for key links such as InP wafers, MOCVD equipment, and 200G EML.
• Commercialization progress of NPO/CPO products and changes in company share.
• Whether gross margins expand as the mix of 1.6T and silicon-photonics products increases in FY26-28F.
• Whether the market accepts higher revenue and earnings forecasts than consensus.