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

Overview

This report is Nomura's company research and rating-adjustment report on Zhongji Xuchuang. The core conclusion is that although AI infrastructure stocks have recently pulled back, the fundamental growth drivers for 2026-2028 have not changed, and high-end optical communication products remain a key bottleneck in the AI data center market. Nomura maintains a Buy rating and significantly raises the target price and profit forecasts.

Core views

The report argues that Zhongji Xuchuang's growth is driven by two main lines: first, upgrades of 1.6T and silicon photonics optical modules; second, expansion in NPO near-field photonics packaging and CPO co-packaged optics market. In the short term, the supply chain remains constrained by upstream INP wafers, MOCVD equipment, and 200G EML segments, but in the long term the supply tightness is expected to ease as dedicated capacity expands in China, Japan, and the U.S. Nomura expects the company's leadership in high-end transceiver modules, 2.4T/3.2T, and NPO/CPO markets to further strengthen.

Analysis framework

The report uses a top-down view of AI data center optical module demand combined with a bottom-up forecast of company shipments, ASP, gross margins, and EPS, and benchmarks the target price against the valuation median of Wind China's A-share technology and electronics components sectors.

Methodology notes

• Valuation methodsPrice-to-earnings multiple method

  20x 2027F EPS

  The target price of CNY1,325 is based on a 20x multiple of 2027F EPS of CNY66.06, and the valuation multiple is in line with the median PE range of Wind's China A-share technology/electronic components sector, with CSI300 as the benchmark index.

• Earnings forecastShipment, ASP, and gross margin forecast

  Revenue and margin upgrades driven by product upgrades

  Nomura raised forecasts for high-end optical module shipments and believes that 1.6T, 3.2T, silicon photonics, and NPO/CPO products will drive ASP and gross margin improvements.

Asset mapping & comparison

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

• Zhongji Xuchuang 300308.SS

  Covered name in the report, with Buy rating maintained and target price raised.

  Strengths

  It has strong high-end optical module R&D capability, supply chain management capability, and is expected to hold 30%-35% share in the global AI IDC transceiver module market; it benefits from upgrades in 1.6T, silicon photonics, 2.4T/3.2T, and NPO/CPO.

  Weaknesses

  In the short term it may be constrained by upstream materials, equipment, and key component supply bottlenecks, and high-growth expectations are sensitive to product upgrade pace and client demand.

  Comparison

  Nomura's 2026-2028 revenue forecasts are 32%-67% higher, and profit forecasts are 14%-38% higher than Wind consensus, reflecting more optimistic assumptions on shipments, ASP, and margins.

  Risks

  AI data center demand for high-end optical modules below expectations, increased competition in 800G/1.6T modules, slower-than-expected upgrade of 3.2T and silicon photonics, and pricing competition affecting exports to global customers.

Key data

• Target priceCNY1,325Raised from previous CNY1,015.
• Current stock priceCNY1,098.92Report disclosed the price date as 2026-07-06.
• Implied upside+20.6%Calculated based on the target price versus the current price.
• 2027F EPS forecastCNY66.06Base for target price valuation.
• Valuation multiple20x 2027f epsConsistent with the median valuation of Wind's China A-share technology/electronic components sector.
• Expected share in global AI IDC optical module market30%-35%The report expects the company to maintain this share range.
• 2027/2028 800G shipment forecast55mn / 78mn unitsPrevious forecast was 50mn / 71.5mn units.
• 2027/2028 1.6T shipment forecast71.5mn / 126mn unitsPrevious forecast was 60mn / 110mn units.
• 2027/2028 2.4T shipment assumption2mn / 5mn unitsNewly included in forecast.
• 2028 3.2T shipment assumption2mn unitsNewly included in forecast.

Impact & implications

If Nomura's view materializes, Zhongji Xuchuang is expected to continue benefiting from the AI data center high-end optical module upgrade cycle, with earnings leverage coming from upward shipment revisions, product mix improvement, and margin expansion. The report's forecasts for revenue and profits from 2026 to 2028 are clearly above Wind consensus, indicating a relatively more constructive view than the broader market.

Risks

• Demand in data communications and telecom for high-end optical modules is weaker than expected.
• Intensifying competition in 800G and 1.6T module segments.
• Slower-than-expected upgrade pace for products such as 3.2T and silicon photonics.
• Rising price competition that may affect company exports to global customers.
• Short-term supply chain bottlenecks including INP wafers, MOCVD equipment, and 200G EML components.

What to watch

• Mass production and shipment pace of 1.6T, 2.4T, and 3.2T modules.
• Commercialization progress of NPO/CPO products and customer adoption.
• Supply improvements in key bottlenecks such as INP wafers, MOCVD equipment, and EML.
• Sustained AI data center capex and high-end optical module order strength.
• Whether gross margins continue to expand due to product mix improvement.
• Whether the gap with Wind consensus expectations narrows as future performance is delivered.