ZHONGJI INNOLIGHT(300308) 招银国际·2024-08-08 02:05Investment Rating - The report maintains a "Buy" rating for Innolight, with a new target price of RMB 150.76, up from the previous target price of RMB 130.71, reflecting a potential upside of 31.7% from the current price of RMB 114.48 [2][3]. Core Insights - The report highlights strong fundamentals for Innolight, driven by robust capital expenditures from major cloud service providers like Google, Microsoft, Amazon, and Meta, which totaled USD 52.9 billion in Q2 2024, marking a significant increase of 57.1% compared to the previous quarter [2]. - Despite recent market volatility and concerns over the U.S. economy, the long-term outlook for AI investments remains positive, with expectations of continued high capital expenditures from major players in the cloud sector [2][3]. - Innolight is positioned as a primary beneficiary of the increasing demand for AI computing, with an attractive valuation of 22.8x and 15.3x for 2024 and 2025 earnings, respectively [2][3]. Financial Summary - Revenue for FY24E is projected at RMB 23,877 million, representing a year-on-year growth of 122.8%, with further growth expected in FY25E and FY26E [3][9]. - Net profit for FY24E is estimated at RMB 5,462 million, reflecting a substantial increase of 151.3% compared to FY23A [3][9]. - The report indicates an upward revision of revenue forecasts by 6% and 11% for FY24E and FY25E, respectively, due to stronger capital expenditure outlooks from cloud companies [2][3]. Valuation Metrics - The new target price of RMB 150.76 is based on a forward P/E ratio of 30x for FY24E, which is 9% higher than the five-year historical average [2]. - The PEG ratio is close to 1, indicating a balanced valuation relative to the expected earnings growth rate of 32% for FY24-26E [2][3]. Market Context - The report notes that major cloud service providers are expected to continue significant investments in AI infrastructure, which will support Innolight's growth trajectory [2][3]. - The overall sentiment in the technology sector remains cautious due to geopolitical tensions and uncertainties surrounding the upcoming U.S. presidential election, but the report emphasizes the resilience of the AI investment theme [2].