ZHONGJI INNOLIGHT(SZ:300308) Zhi Tong Cai Jing·2025-12-12 12:53Core Viewpoint - The stock price of Zhongji Xuchuang, a global leader in optical modules, has reached a historical high, with Goldman Sachs maintaining a positive outlook and projecting strong growth in the company's performance, setting a target price of 762 RMB, indicating a potential upside of over 30% from the current price of 582 RMB [1][2]. Group 1: Market Demand - Goldman Sachs expresses optimism regarding terminal market demand, driven by the growth in AI server shipments and the increasing proportion of ASIC AI servers, with a significant rise in rack-level AI servers expected by 2026 [4]. - The diversification of AI server chip platforms, particularly with more ASIC AI server models anticipated in the second half of 2026, will increase the demand for optical modules, further supporting industry growth [4]. - The transition from EML to silicon photonic optical modules is expected to enhance Zhongji Xuchuang's gross margin due to lower costs associated with silicon photonic technology [4]. Group 2: Supply Side Improvement - Goldman Sachs forecasts ongoing improvements in the supply side over the coming years, with silicon photonic chip foundries expanding capacity and the supply of indium phosphide (InP) substrates in mainland China returning to normal [6]. - Monthly revenues for InP epitaxial wafer and continuous wave laser suppliers, LandMark and VPEC, are gradually recovering, indicating a mitigation of the impacts from export controls [6]. - These companies are expanding their InP substrate supplier channels and increasing capacity for epitaxial wafers and continuous wave lasers to meet future growth demands, supporting the development of silicon photonic optical modules [6]. Group 3: New Opportunities in On-Board Optical Modules - Despite market concerns that the evolution of optical modules towards optical engines may reduce the added value of Zhongji Xuchuang in the on-board optical module (NPO) sector, Goldman Sachs believes that product pricing will still be linked to speed as high-speed interconnects continue to upgrade [8]. - The competition in the industry is becoming healthier, requiring suppliers to possess photonic integrated circuit (PIC) design capabilities, with the optical engines in NPOs being more integrated than pluggable optical modules [8]. - Zhongji Xuchuang's involvement in the NPO business demonstrates its strong research and development capabilities, keeping pace with the technological iterations of major cloud service providers in the U.S. [8].