ZHONGJI INNOLIGHT(300308) 高盛证券·2024-10-27 16:27Investment Rating - The report maintains a Buy rating for Innolight (300308 SZ) despite a 7% reduction in the 12-month target price to RMB 215 (from RMB 230) due to near-term supply constraints [1] Core Viewpoints - Innolight's 3Q24 net profit of RMB 1 39bn (+3% QoQ +104% YoY) missed Goldman Sachs estimates by 12% primarily due to FX losses of ~RMB 80mn and EML supply tightness which slowed shipment growth [1] - Demand for 800G and 1 6T transceivers remains strong with 3Q order growth outpacing shipment growth Management expects 800G demand to grow significantly into 2025 driven by cloud customers' AI inferencing on Ethernet networks while 400G demand is expected to phase out gradually in 2H25 [1][3][4] - 100G EML supply is expected to remain tight through 4Q24 but may improve in 1H25 due to supplier capacity expansion and Innolight's increased EML order placements [2] Financial Performance Summary - 3Q24 revenue was RMB 6 514bn (+115% YoY) with gross profit of RMB 2 191bn (+116% YoY) and gross margin of 33 6% (+0 1ppts YoY) [2] - Operating profit for 3Q24 was RMB 1 751bn (+143% YoY) while net income reached RMB 1 39bn (+104% YoY) [2] Estimate Revisions - Revenue estimates for 2024-26E were revised down by 4% due to FX changes and component constraints Net profit estimates were revised down by 6%-9% [6] - 2024E revenue is now projected at RMB 24 491bn (-4% vs previous estimate) with gross profit of RMB 8 221bn (-6 7%) and net income of RMB 5 222bn (-9%) [7] Industry and Competitive Position - Innolight is the largest optical transceiver supplier in China's datacom market with a leading position in global 800G/1 6T optical transceivers used in AI networking [8] - The company benefits from strong execution in capacity ramp and new product development maintaining tight supply relationships with global hyperscalers and networking/GPU vendors [8] Component Pricing and Margins - Potential price hikes from EML and DSP vendors are expected to have limited impact on Innolight's margins as pricing is still under negotiation and not all vendors are seeking price increases [5]