中际旭创：Solid results despite supply chain constraints; expect for another strong year in 2025

Investment Rating - The report maintains a BUY rating on Innolight with a target price of RMB186.00, indicating a potential upside of 45.0% from the current price of RMB128.25 [2][6]. Core Insights - Innolight is expected to see a significant increase in net profit (NP) for FY24, projected to rise by 111.6%-166.9% to RMB4.6 billion - RMB5.8 billion, with a midpoint of RMB5.2 billion reflecting a 139.2% year-over-year growth [1][6]. - The company is positioned as a key beneficiary in the ongoing AI infrastructure investment cycle, driven by strong global demand for computing power [1][6]. - Recent developments in AI spending, including substantial investments from major companies, indicate a robust outlook for AI-related products, particularly optical transceivers [1][6]. Financial Summary - Revenue is projected to grow from RMB10,718 million in FY23 to RMB24,269 million in FY24, representing a year-over-year growth of 126.4% [7][9]. - Net profit is expected to increase from RMB2,174 million in FY23 to RMB5,276 million in FY24, marking a 142.8% growth [7][9]. - The gross margin is anticipated to remain stable at around 33.3% in FY24, slightly decreasing to 32.3% in FY25 [7][9]. Share Performance - The stock has experienced a 1-month decline of 2.6% and a 3-month decline of 18.4%, indicating recent volatility [4]. - The 52-week high and low for the stock are RMB185.83 and RMB72.29, respectively, reflecting significant price fluctuations [2][4]. Growth Drivers - The main growth driver for Innolight in 2025 is expected to be the 800G product line, with a gradual ramp-up of 1.6T products anticipated in subsequent years [6][9]. - The company has seen strong demand for its 400/800G products, with a favorable product mix expected to shift towards higher sales of 800G products in 2025 [6][9]. Market Context - The report highlights that the fear surrounding the mainstream adoption of CPO solutions is overstated, as there are still technical challenges to overcome [1][6]. - Major AI spending initiatives, such as Meta's planned $60-65 billion capex for 2025 and ByteDance's $12 billion consideration for AI investments, underscore the ongoing demand for AI computing power [1][6].