Summary of Conference Call Notes Industry Overview - The focus is on the **Optical Transceiver** industry, specifically companies **Innolight** and **Eoptolink**. - The upcoming earnings reports for these companies are anticipated between **October 23 and 30**. Key Points and Arguments Market Conditions - There has been **profit-taking pressure** following strong share performance year-to-date [1] - Proposed **new tariffs on China** by the US may have a limited impact on these companies as they primarily ship from **Thailand to the US** [1] - Upcoming catalysts include **CSP customers' results** and the **OCP Global Summit** from **October 13 to 16** [1] Innolight Financial Expectations - Expected **3Q net profit** of **Rmb3.0 billion**, representing a **113% YoY** increase and **23% QoQ** increase [2] - Anticipated **gross margin** of **43%** and **net margin** of **30%** [2] - Key focus on the contribution from **1.6T shipments** and improvements in margins [2] Eoptolink Financial Expectations - Expected **3Q net profit** of **Rmb2.85 billion**, reflecting a **265% YoY** increase and **20% QoQ** increase [3] - Anticipated **gross margin** of **49.5%** and **net margin** of **40%** [3] - Focus on the **shipment ramp pace** and margin improvements [3] Earnings Estimates Snapshot - **Innolight**: - Revenue: **Rmb9,892 million** (+52% YoY, +22% QoQ) - Gross Profit: **Rmb4,257 million** (+94% YoY, +26% QoQ) - Net Profit: **Rmb2,968 million** (+113% YoY, +23% QoQ) [4] - **Eoptolink**: - Revenue: **Rmb7,154 million** (+198% YoY, +12% QoQ) - Gross Profit: **Rmb3,542 million** (+255% YoY, +19% QoQ) - Net Profit: **Rmb2,853 million** (+265% YoY, +20% QoQ) [4] Long-term Growth Outlook - Companies expect a **robust long-term growth trend** driven by **AI** [9] - Investors are looking for **concrete guidance** on the **800G/1.6T volume outlook for 2027E** [9] - Positive commentary on **2027 demand** could enhance market confidence [9] OCP Global Summit Insights - The summit will showcase **new products** and **technology upgrade trends** [10] - Potential introduction of **optics in scale-up networks** could expand opportunities for optical transceivers [10] Earnings Revisions - **Innolight**: Revenue estimates raised by **up to 14%** for 2025-27E, leading to a **3%-14%** upward revision in net profit estimates [11] - **Eoptolink**: Revenue estimates raised by **7%-17%** for 2025-27E, with net profit estimates revised up by **7%-16%** [12] Investment Thesis - **Innolight**: - Leading position in **800G/1.6T optical transceivers** for AI networking [19] - Strong execution in capacity ramp and product development [20] - Current valuation is appealing based on historical averages [18] - **Eoptolink**: - Positioned to benefit from **800G/1.6T volume ramp-up** [22] - Stock trades at an average level historically, seen as undemanding [22] Risks - **Innolight**: Risks include slower-than-expected demand for **800G**, geopolitical risks, and margin instability [21] - **Eoptolink**: Risks include slower-than-expected ramp pace, geopolitical issues, and increased competition [23] Conclusion - Both **Innolight** and **Eoptolink** are rated as **Buy** with target prices of **Rmb470** and **Rmb450** respectively, based on their growth potential and market positioning [21][23]

Core Insights - Coherent Corp. (COHR) achieved a 16.4% year-over-year growth in revenue during the June quarter, driven by its AI-related Datacom transceiver business [1][9] - The company's 800G transceiver, crucial for supporting AI workloads, was a significant growth driver, aligning with the increasing demand for high-speed data center components [1] - Coherent introduced 1.6T transceiver products, generating its first revenues in the fourth quarter of fiscal 2025, showcasing its strong R&D capabilities [2] Financial Performance - Coherent reported a non-GAAP gross margin of 38.1% in the June quarter, an increase of 290 basis points from the previous year, indicating improved profitability [3][9] - The trailing 12-month EBITDA margin for COHR was 24%, significantly higher than the industry average of 14.9% and its competitors Lumentum (1.5%) and IPG Photonics (9.6%) [7][9] - Despite lower R&D spending as a percentage of sales (10% compared to the industry average of 7.2%), Coherent's operational efficiency is highlighted by its higher margins [4][10] Market Position - Over the past six months, Coherent's stock has increased by 48.2%, outperforming the industry’s 43.7% and the S&P 500 Composite's 18.2% [11] - Coherent trades at a forward price-to-earnings ratio of 21.17X, which is lower than the industry average of 29X, indicating potential value [14] - The Zacks Consensus Estimate for COHR's earnings for fiscal 2026 and 2027 has risen by 2.7% and 6%, respectively, over the past 60 days [17]

Investment Rating - The report maintains a "Buy" rating for Zhongji InnoLight with a target price reduced to CNY 125, implying a 54% upside from the closing price of CNY 81.19 on April 21, 2025 [5][26]. Core Insights - The company experienced significant revenue and earnings growth in FY24, with year-on-year revenue growth of 122.6% and earnings growth of 142.6%. However, 1Q25 revenue growth was subdued at 37.8% year-on-year due to a shortage of EML chips, while earnings rose 56.8% year-on-year, driven by better gross profit margins [1][2][19]. - Demand for 800G transceivers is expected to remain strong, while demand for 1.6T transceivers may slow down this year but is anticipated to ramp up next year. The easing of the EML chip shortage is expected to improve shipment volumes in the coming quarters [2][19]. - The report highlights that a temporary tariff exemption is currently easing margin pressure and may boost near-term shipments, although the risk of a tariff hike remains a concern [3][19]. Financial Summary - FY24 revenue was reported at CNY 23,862 million, with a projected revenue of CNY 37,228 million for FY25 and CNY 41,462 million for FY26. The normalized net profit for FY24 was CNY 5,171 million, with projections of CNY 8,202 million for FY25 and CNY 9,373 million for FY26 [4][10]. - The gross profit margin (GPM) is expected to improve slightly, with FY25-26F GPM raised by 0.1 percentage points due to a better product mix [16][19]. - The company is currently trading at a normalized P/E of 9.7x for FY26F, which is below the median P/E range of the China electronic/communication component companies [1][4][19].