Xin Yi Sheng 1.6T optical modules dual-scheme launch, 3.2T/6.4T open long-term space

Overview

Goldman Sachs releases performance review report on Xin Yi Sheng(300502.SZ), maintaining 'buy' rating and raising 12-month target price from Rmb737 to Rmb841. The report focuses on Xin Yi Sheng's synchronization of 1.6T high-speed optical modules under EML (electrically absorbed modulated laser) and silicon photonic (SiPh) two technical solution schemes, while looking ahead at long-term growth potential from 3.2T optical modules and 6.4T co-packaged optical (NPO). The institution has raised 2027-2028 earnings forecasts by 5% and 6%, reflecting optimism about increased revenue contribution from high-speed products.

Core views

Demand side: AI computing infrastructure construction continues to drive upgrades in high-speed optical module demand. Cloud service providers (CSP) have strong demand for higher bandwidth, lower power consumption connection solutions, driving the scaling of 1.6T optical modules beginning in 2026 and laying the groundwork for NPO solutions. Product and technology roadmap: Xin Yi Sheng adopts an EML and silicon photonic dual-track strategy in the 1.6T era. While 200G/lane EML chips are currently supply constrained (as mentioned in recent financial reports by suppliers like Lumentum), the company's self-developed silicon photonic solutions are expected to scale up gradually from mid-2026 to 2027, reducing dependency on a single chip solution. This layout stems from the acquisition of Alpine Optoelectronics in 2022, which specializes in silicon photonic and coherent light technologies. Capacity and supply chain: Expansion of the company's Thai production base supports enhanced delivery capacity. As of end Q1 2026, inventory reached Rmb9 billion (Rmb7.2 billion at end 2025), prepayments reached Rmb6.82 billion (Rmb0.17 billion at end 2025), Goldman Sachs believes this reflects proactive inventory buildup for Q2/Q3 2026 scaling.

Analysis framework

Goldman Sachs uses a framework combining 'product generation iteration + diversified technology routes' to assess Xin Yi Sheng's growth potential. The institution first tracks the industry cycle of optical module speed upgrades (from 800G to 1.6T, 3.2T generations), then analyzes the company's depth of layout in different technology routes (EML vs. silicon photonic vs. new materials LNOI), thereby judging its supply chain resilience and cost curve position. Valuation level: The firm employs a forward PE valuation method, setting the target PE relative to peer average transaction PEs and the company's own historical averages rather than using fixed multiples. The key is understanding that the target PE is not arbitrarily set but reflects pricing for future earnings growth (NI YoY) and profitability (OPM) — higher growth rates and more stable profit margins lead to higher PE multiples.

Methodology notes

• Valuation MethodPE/PEG valuation

  Forward PE valuation anchored to fundamentals

  Goldman Sachs uses the forward PE as the core valuation anchor, linking the target PE to peer average transaction PEs and the company's own historical averages rather than simply applying fixed multiples. This approach emphasizes understanding that the target PE is not arbitrarily set but reflects pricing for future earnings growth and profitability.

• Industry/Sector Analysis FrameworkSupply and Demand Framework

  Optical module industry analysis of 'speed upgrade cycles × chip supply constraints'

  The analysis of high-speed optical modules hinges on understanding the 'generation rhythm': the timing of each new speed release (e.g., 800G → 1.6T → 3.2T) depends on cloud vendors' capital expenditure cycles, while specific market share is constrained by upstream core chip supplies (e.g., EML, DSP). The mention of tight 200G/lane EML supply in the report exemplifies how supply constraints impact product scaling.

• Competitive and Strategic FrameworkMoat / competitive advantage

  Diversified technology routes as a source of supply chain resilience

  Xin Yi Sheng reduces reliance on a single EML chip supplier through self-developed silicon photonic solutions, representing a 'vertical integration + diversified technology route' competitive strategy. In an industry characterized by rapid technological iterations and concentrated supply chains, possessing multiple technology routes provides a moat enabling the company to maintain deliveries during chip shortages, preserve customer relationships, and benefit from consistent growth.

Key data

• Target PriceRmb841 (previous value Rmb737)Raised 14%, based on 28.4 times 2027E forward PE
• Target 2027E Forward PE28.4xPreviously 26.0x, roughly in line with the company's historical average of 28 times
• 2027/28 Earnings Forecast AdjustmentsIncreased by 5%/6%Due to higher 1.6T optical module and NPO revenue expectations
• 2027/28 Gross Margin Forecast AdjustmentIncreased by 0.1 percentage pointsOptimized product portfolio and economies of scale
• 2027-28 Average Net Profit Growth Rate25%Core assumption supporting target PE increase
• 2027-28 Average Operating Profit Margin33%Reflects improved profitability due to higher proportion of advanced products
• Inventory End Q1 2026Rmb9 billionSignificantly increased from Rmb7.2 billion end 2025, supporting subsequent scaling
• Prepayments End Q1 2026Rmb6.82 billionA substantial rise from Rmb0.17 billion end 2025, securing upstream capacity

Impact & implications

Goldman Sachs believes Xin Yi Sheng is at a critical juncture in transitioning from 800G to 1.6T and higher-speed products. Short term, 800G EML remains the primary revenue driver for 2026, but the gradual scaling of 1.6T will improve the product portfolio. Mid-term, starting in 2027, 1.6T becomes the main growth engine, while 6.4T NPO begins contributing revenue, and 3.2T products based on EML, silicon photonic, or LNOI multi-technology routes provide options for navigating technology cycles. Thailand capacity expansion ensures delivery to major overseas customers. Overall, the firm views Xin Yi Sheng's technological layout and capacity preparations as enabling it to fully benefit from continued investment in AI computing infrastructure.

Risks

• Slowdown in 800G product scaling compared to expectations
• Geopolitical issues potentially impacting optical module supply chains
• Excessive competition leading to price erosion and profit margin decline

What to watch

• Quarterly shipment rhythm of 1.6T optical modules under EML and silicon photonic solutions
• Evolution of 200G/lane EML chip supply constraints
• Progress of capacity ramp-up at Thai production base
• Customer demand progress for 6.4T NPO
• Development progress of 3.2T optical modules based on LNOI and other new materials