Nomura maintains its Buy rating on Zhongji InnoLight and raises the target price to CNY1,375

Overview

This is a company research and rating adjustment report by Nomura on Zhongji InnoLight (中际旭创, 300308 CH). Despite the recent share-price correction, the report emphasizes that the company's fundamental growth drivers remain intact, including upgrades to 800G/1.6T and silicon photonics transceivers, the commercialization of 2.4T and NPO in 2027, and longer-term expansion in the 3.2T, XPO, and CPO markets.

Core views

The core view is that Zhongji InnoLight's leading position in high-end AI data center optical modules remains solid. Nomura believes concerns about new entrants and intensifying competition are excessive, as new technology paths such as 2.4T, 3.2T, NPO, and CPO will raise technical barriers. Supported by R&D investment, product development, and supply-chain management, the company is expected to maintain a 30-35% share of the global AIDC optical module market and higher shares in 1.6T, 2.4T, and 3.2T products.

Analysis framework

The report combines global data center optical transceiver shipment forecasts, NPO/CPO market TAM estimates, company market-share assumptions, gross-margin and earnings forecast revisions, and a relative P/E valuation framework to derive the target price and investment rating.

Methodology notes

• Valuation methodRelative P/E valuation

  Target price based on 21x FY27F EPS

  The new target price of CNY1,375 is based on 21x FY27F EPS of CNY65.47, referencing the median P/E of Chinese A-share technology/electronic component companies in WIND; the previous multiple was 20x.

• Earnings forecastsRevenue, gross-margin, and EPS revisions

  Product upgrades drive upward earnings revisions

  The report raises FY26-28F revenue forecasts by 2-5%, gross-margin forecasts by 1.5-3.1 percentage points, and earnings forecasts by 4-10% to reflect 2.4T, NPO/CPO, and an improved product mix.

• Industry analysisOptical module shipments and product roadmap

  Upgrade cycle for 800G/1.6T, 2.4T, NPO, and 3.2T/CPO

  The report uses shipment forecasts for 800G, 1.6T, 2.4T, and NPO, together with CPO penetration and TAM estimates, to assess the company's medium- and long-term growth potential.

• Relative comparisonNomura forecasts versus WIND consensus estimates

  Nomura's forecasts are significantly above market consensus

  The report states that its FY26-28F revenue forecasts are 34-75% above WIND consensus estimates and its earnings forecasts are 21-50% higher, reflecting more optimistic assumptions for shipments, ASP, and gross margins.

Asset mapping & comparison

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

• Zhongji InnoLight（300308 CH）

  Covered company; Buy rating maintained and target price raised

  Strengths

  Complete high-end optical module product roadmap, leadership in 800G/1.6T, imminent commercialization of 2.4T and NPO, and strong R&D and supply-chain management capabilities.

  Weaknesses

  Growth depends on AI data center capital expenditure, the pace of product upgrades, and the supply of high-end upstream materials.

  Comparison

  Nomura's FY26-28F revenue and earnings forecasts are respectively 34-75% and 21-50% above WIND consensus estimates, indicating a significantly optimistic view.

  Risks

  Demand below expectations, intensifying competition in 800G/1.6T, slower-than-expected upgrades of 3.2T and silicon photonics products, and the impact of price wars on exports.

• AI data center optical module industrial chain

  Zhongji InnoLight's core source of demand and growth segment

  Strengths

  The 800G/1.6T upgrade cycle, 2.4T, NPO, and CPO create multi-stage demand expansion.

  Weaknesses

  Supply may be temporarily constrained in areas such as high-end laser chips, InP wafers, and EML/CW lasers.

  Comparison

  NPO is viewed as a replacement path more favorable than CPO for the existing pluggable optical module value chain.

  Risks

  CPO yield rates, supply-chain challenges, and penetration uncertainty may affect the realization of long-term TAM.

Key data

• RatingBuyBuy rating maintained.
• Target priceCNY1,375Raised from CNY1,325; equivalent to 21x FY27F EPS.
• Closing priceCNY902.01Price date: 2026-07-31.
• Implied upside+52.4%Based on the target price and closing price presented in the report.
• FY27F EPSCNY65.47Used for the 21x P/E valuation.
• Revenue forecast revisionFY26-28F raised by 2-5%Reflecting high-end optical module demand, 2.4T demand, and NPO/CPO business expansion.
• Earnings forecast revisionFY26-28F raised by 4-10%Driven by upward revenue revisions and gross-margin expansion.
• Gross-margin revisionFY26-28F raised by 1.5-3.1 percentage pointsDriven by an improved product mix of silicon photonics, 2.4T, and NPO/CPO products.
• 800G shipment forecast2026F/2027F/2028F at 40.8mn/57.8mn/78.0mn unitsGlobal data center optical transceiver forecast.
• 1.6T shipment forecast2026F/2027F/2028F at 25.1mn/68.8mn/126.0mn unitsThe report considers 1.6T a key growth driver for FY26-28F.
• 2.4T shipment forecast2027F/2028F at 3mn/8mn unitsRaised from the previous forecast of 2mn/5mn.
• NPO shipment forecast2027F/2028F at 8mn/25mn unitsRaised from the previous forecast of 5mn/20mn; Zhongji InnoLight is expected to achieve a 40-50% share.
• AIDC optical module share30-35%The report expects the company to maintain this global share in FY26-28F.
• 1.6T/2.4T/3.2T share assumptions40-47% / 40-50% / 50-55%Reflecting its leading position in high-end products.
• H-share listing proceedsApproximately HKD53bnIntended for R&D, global capacity expansion, and strategic investment in the industrial chain.
• Capacity expansion targetAnnual capacity increased from approximately 40mn units to 90mn unitsManagement targets reaching this level around 2029.

Impact & implications

The report's implications for Zhongji InnoLight are positive: if high-end AI data center optical module demand, 2.4T/NPO commercialization, and supply-chain normalization progress as expected, the company has room for upward revisions to revenue, margins, and valuation. For the industrial chain, silicon photonics, NPO/CPO, high-end lasers, and global capacity expansion will be key variables going forward.

Risks

• Demand for high-end optical modules in the data communications and telecommunications markets may be weaker than expected.
• Competition in 800G/1.6T optical transceivers may intensify.
• Upgrades to 3.2T, silicon photonics, and other products may be slower than expected.
• Increasing price competition may affect the company's exports to global customers.
• The supply and pricing of upstream materials or components such as InP wafers and EML/CW lasers remain uncertain.
• CPO technology yields, supply-chain challenges, and penetration may progress below expectations.

What to watch

• Whether shortages of upstream materials and components ease in 2H26F.
• Whether global 800G and 1.6T shipments reach the report's forecasts.
• The commercialization progress of 2027F 2.4T coherent-lite transceivers and NPO.
• Demand for NPO among hyperscale customers and whether Zhongji InnoLight realizes its expected share.
• The long-term application pace, yields, and TAM changes for 3.2T transceivers and CPO.
• Execution of R&D, capacity expansion, and industrial-chain investments following the Hong Kong H-share listing.
• Whether the company's gross margins continue to expand in line with Nomura's forecasts.