Investment Rating - Investment rating: Positive (maintained) [1] Core Insights - The silicon photonics era is accelerating, with leading companies showcasing competitive advantages and numerous new technologies creating investment opportunities [5][12] - The communication industry is experiencing continuous upgrades, with the demand for AI computing driving growth in the optical communication sector [5][12] - The 26th China International Optoelectronic Exposition (CIOE 2025) highlighted the maturity and market focus on silicon photonics technology, which is becoming the mainstream solution for 1.6T high-speed optical modules [5][12] Summary by Sections 1. Investment Outlook - The report emphasizes the competitive advantages of leading companies in the silicon photonics era and the emergence of new technologies such as OCS, hollow-core fibers, thin-film lithium niobate, and CPO [12] - The 800G optical module has become mainstream, with 1.6T expected to ramp up production imminently [13][14] - The report identifies key investment targets including Zhongji Xuchuang, NewEase, and Tianfu Communication, with beneficiaries including Huagong Technology and Guangxun Technology [7][14] 2. Optical Modules - Zhongji Xuchuang has begun mass production of 1.6T optical modules and is developing 3.2T products, while NewEase has significantly ramped up its 1.6T module supply to overseas clients [13][14] - The report notes that 800G has become the mainstream technology, with many manufacturers actively preparing for 3.2T technology [14] 3. Silicon Photonics Technology - The report highlights the rapid development of silicon photonics technology, with increasing market attention and maturity for OCS, CPO, and thin-film lithium niobate technologies [19][20] - Companies like Huagong Technology are advancing their CPO technology, showcasing integrated chips with low power consumption and high bandwidth density [19][20] 4. Optical Chips - The demand for CW laser chips is increasing, with companies like Yuanjie Technology successfully mass-producing CW70mW laser chips [25] - Long光华芯 has released a 200mW Uncool CW DFB optical communication chip to support the silicon photonics integration needs of 800G and 1.6T optical modules [25] 5. Cables - The report notes the gradual advancement of optical and copper cable solutions, with hollow-core fibers gaining attention [27] - Long飞公司 demonstrated a 100km hollow-core fiber link with a low attenuation of 0.089dB/km [27] 6. Investment Recommendations - The report suggests focusing on seven key industry directions for investment, including network equipment, AIDC data center construction, IT equipment, computing power leasing, cloud computing platforms, AI applications, and satellite internet & 6G [31][32] - Recommended targets for optical modules and devices include Zhongji Xuchuang, NewEase, and Tianfu Communication, with beneficiaries such as Yuanjie Technology and Huagong Technology [31][32]

和辉光电总经理刘惠然表示，盈亏平衡是一个动态的过程，会因市场需求、产品价格及成本的变化而变 化。未来，公司将继续加大市场开拓力度，通过研发创新和技术升级不断丰富和优化产品结构，提升产 品附加值，同时持续改进生产工艺，提高生产效率和产品良率，保持AMOLED产品出货量的持续增 长，快速提升毛利率和净利润率，进而实现业绩的稳步增长。 关注重点项目进展 本次业绩说明会上，相关上市公司重点项目和业务进展情况成为"必答题"。 其中，龙图光罩的珠海募投项目被多位投资者提及。龙图光罩董事长柯汉奇表示，2025年上半年，龙图 光罩珠海项目顺利投产，公司第三代掩模板PSM产品取得显著进展。公司KrF-PSM和ArF-PSM陆续送往 部分客户进行测试验证，其中90nm节点产品已成功完成从研发到量产的跨越，65nm产品已开始送样验 证，已完成40nm生产设备的布局。该项目年规划产能1.8万片，预计达产后产值5.4亿元。珠海公司二季 度已开始小规模量产，预计2025年下半年开始将逐步放量。 9月10日，2025年半年度科创板半导体设备及材料行业集体业绩说明会在线举行。20家科创板上市公司 集体亮相，向投资者介绍公司经营业绩情况，分享 ...

Core Insights - The 2025 semi-annual performance briefing for the semiconductor equipment and materials industry on the Sci-Tech Innovation Board was held online, featuring 20 listed companies presenting their operational performance and business developments [1] Financial Performance Overview - Yuanjie Technology reported a significant increase in revenue and net profit in the first half of 2025, attributed to breakthroughs in high-end data communication and large-scale shipments of CW lasers [2] - Shengkong Co. highlighted three trends in its performance: stable gross margins in its main business of large-diameter silicon materials, an increase in revenue share from silicon components, and the integration of silicon materials and components driving growth [2] - Hehui Optoelectronics emphasized the dynamic nature of reaching breakeven, focusing on market expansion, product innovation, and improving production efficiency to enhance gross and net profit margins [2] Key Project Developments - Longtu Photomask's Zhuhai project successfully commenced production in the first half of 2025, with significant progress in its third-generation photomask products, including successful transitions from R&D to mass production for 90nm products [3] - Fangbang Co. reported that its peelable copper technology has passed certifications from several PCB manufacturers, with expectations for gradual order increases as the technology gains acceptance [3] - Xinyi Chang's new robotics subsidiary is on track to launch new robotic products by the end of September 2025, with plans for humanoid robots in early 2026 [3] Future Development Plans - Deep Tech plans to enhance profitability by focusing on core equipment for smart glasses and other semiconductor-related products in the second half of 2025 [4] - Hehui Optoelectronics aims to expand its market presence in the medium and large-sized AMOLED panel sector, leveraging its established technology and supply chain advantages [5] - The company has maintained its leading position in domestic shipments of AMOLED displays for tablets and laptops from 2020 to mid-2025, with plans to increase the localization rate of raw materials to over 80% [5]

Investment Rating - The report gives a "Strong Buy" rating for the company [3]. Core Views - The company is a leading supplier of optical chips, transitioning from "passive + active" to optoelectronic integration, focusing on core optical communication technologies [12]. - The acquisition of Fokexima, a domestic leader in MT chip production, is expected to enhance the company's competitive edge in high-density optical transmission devices [7][24]. - The company is benefiting from the explosive demand for computing power, with significant growth in revenue driven by AWG and MPO businesses [7][20]. Financial Data and Valuation - The projected total revenue for 2023 is 755 million yuan, with a year-on-year decline of 16%, followed by a recovery in 2024 with a forecasted revenue of 1.075 billion yuan, representing a 42% increase [2]. - The net profit for 2025 is expected to reach 499 million yuan, with a year-on-year growth of 669% [2]. - The company's PE ratio is projected to decrease from 556.1 in 2024 to 26.8 by 2027, indicating improving valuation metrics as earnings grow [2]. Business Analysis - The company has a strong focus on optical chip and device business, with significant contributions from AWG and MPO segments driving high growth [7][20]. - The CW laser technology is expected to see breakthroughs, which could further enhance revenue growth [7]. - The company has established a solid foundation with a stable shareholding structure and a deep talent pool, supported by long-term collaboration with the Chinese Academy of Sciences [35][38]. Industry Analysis - The demand for AWG products is increasing due to the growth of optical modules driven by data center construction [7]. - The MPO and MT-FA components are critical in high-density optical fiber connections, with demand closely linked to GPU and optical module usage [7]. - The market for optical modules is projected to grow significantly, with the company positioned to benefit from this trend [7].

Summary of Company and Industry Insights Company Overview - The company is engaged in the data center and telecommunications sectors, with significant growth driven by AI demand and advancements in laser technology [2][3]. Key Financial Performance - In the first half of the year, the company achieved revenue of 24.95 million yuan, a year-on-year increase of 70.57%, and a profit of 46.26 million yuan, up 330.31% [3]. - Data center business revenue reached 10.46 million yuan, reflecting a staggering year-on-year growth of 1,034.18% [3]. - Operating cash flow increased by 300%, attributed to expanded revenue and improved collection efforts [4][19]. Product Development and R&D - The company has made significant progress in the development of 300mW high-power light source chips, aligning with international standards [6]. - The 100G EML product has passed customer validation and is set for mass production, while the 200G EML product is in the promotion phase [13]. - The company is actively developing 400G EML and exploring various technologies, including heterogeneous integration and thin-film lithium niobate [4][20]. Market Trends and Strategic Positioning - The data center market is expected to continue growing due to AI demands, particularly in CPU and O2O segments, which will require more light sources [7]. - The company has established a strong market position, surpassing telecommunications revenue, and is well-prepared for large-scale product promotion in the 25G and 50G segments [15][16]. Profitability and Margin Improvement - The second quarter saw a gross margin increase of 20 percentage points year-on-year and 7 percentage points quarter-on-quarter, driven by process improvements and product pricing [10]. - The company aims to maintain high gross margins through product iteration and process enhancements [10]. Industry Dynamics - The company is aware of rising prices among competitors in the optical chip market, reflecting supply-demand imbalances [11]. - Collaboration with major module manufacturers is ongoing, with a focus on high-end markets [12]. Future Capacity and Expansion Plans - The company is expanding its production capacity, which involves not only equipment but also personnel training and quality assurance [5][22]. - An overseas factory is under construction, expected to be operational by 2026, aimed at enhancing market reach [22]. R&D Investment and Future Outlook - R&D investments are expected to grow significantly as the company focuses on multiple product lines and technological advancements [27][29]. - The company is committed to maintaining a high level of R&D spending to support long-term growth and innovation [28]. Conclusion - The company is well-positioned in the rapidly evolving data center and telecommunications markets, with strong financial performance, innovative product development, and strategic expansion plans. The focus on AI-driven demand and high-margin products will likely sustain its growth trajectory in the coming years.

Financial Data and Key Metrics Changes - In Q3, the company reported revenue of $425.2 million and non-GAAP EPS of $0.57, both exceeding the high end of guidance [20] - Non-GAAP gross margin was 35.2%, up 290 basis points sequentially and 650 basis points year on year, attributed to better manufacturing utilization and a favorable product mix [20][21] - Non-GAAP operating margin improved to 10.8%, up 290 basis points sequentially and 1,100 basis points year on year [20][21] Business Line Data and Key Metrics Changes - Cloud and Networking segment revenue reached $365.2 million, increasing 8% sequentially and 16% year on year, driven by strong demand from hyperscale cloud customers [9][22] - Industrial Tech segment revenue was $60 million, down 5% sequentially but up 14% year on year, with ultrafast laser shipments remaining steady [14][15][22] Market Data and Key Metrics Changes - The company anticipates strong sequential growth in the Cloud and Networking segment in Q4, driven by new capacity and increasing demand from network equipment manufacturers [14] - The Industrial Tech segment is expected to see a sequential decline in revenue due to ongoing macroeconomic headwinds and typical seasonal trends [16] Company Strategy and Development Direction - The company aims to achieve quarterly revenue of $750 million, gross margins above 40%, and operating margins greater than 20% [6][18] - Focus on high-growth areas such as cloud and AI, with investments directed towards expanding manufacturing capacity and product offerings [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving medium and long-term financial targets despite macroeconomic uncertainties and tariff impacts [18] - The company is building resilience through a diversified manufacturing footprint and flexible supply chain [18] Other Important Information - The company is ramping production of CW lasers and EMLs, with expectations to double EML shipments by the end of calendar 2025 [10][11] - The company is also focusing on co-packaged optics (CPO) as a future growth area, although significant adoption is expected to take several years [118] Q&A Session Summary Question: How is the company tracking towards the $500 million revenue target? - Management confirmed they are still on track for the $500 million target by the end of the year, emphasizing confidence in current performance [30] Question: Update on datacom chip business performance? - The company is outperforming initial expectations in terms of volume and ASP, with a focus on increasing capacity for EMLs and CW lasers [32][34] Question: Clarification on tariff headwinds? - The company quantified a 100 basis point headwind to gross margins due to increased component costs and tariffs, with plans to move more production to Thailand to mitigate this [41][42] Question: Contributions from co-packaged optics? - Management indicated that while CPO is a long-term prospect, they are looking to add components to the CPO ecosystem over the coming years [48][118] Question: Insights on telecom performance and supply issues? - Telecom performance met expectations, with improvements anticipated in supply for pumps and tunables moving into Q4 [97][99] Question: Guidance caution related to macro or tariffs? - Management acknowledged macro uncertainty but expressed confidence in the guidance provided, highlighting strong demand across product lines [100][102]

Group 1: Rare Earth Export Control - China has implemented export controls on seven types of medium and heavy rare earths, enhancing resource sovereignty and pricing power while combating low-price exports to safeguard strategic needs in new energy and military sectors [1] - The price of terbium surged 210% within a month to $3,000 per kilogram, while dysprosium doubled to $850 per kilogram, leading to a rapid reassessment of the strategic value of rare earths in the global market [1] - The supply chains of key products such as the US F-35 fighter jet and Tesla electric vehicles are disrupted, resulting in cost surges and challenges in the military and new energy industries [1] - Northern Rare Earth's profits skyrocketed by 727% in the first quarter, and deep processing companies like Ningbo Yunsheng saw a significant increase in export orders, enhancing profit margins in the magnetic materials sector [1] - The US plans to impose tariffs on Chinese magnets, while China controls 40% of global dysprosium and terbium supply through overseas investments, making rare earths a new focal point in US-China competition [1] - The rapid expansion of global electric vehicles, wind power, and robotics is driving a 30% annual increase in rare earth demand, with prices expected to rise by 50% over the next 2-3 years [1] Group 2: Huawei HarmonyOS Ecosystem - Huawei's HarmonyOS employs a distributed microkernel architecture, enabling cross-device collaboration among smartphones, tablets, and automotive systems, with HarmonyOS NEXT further advancing the native ecosystem [4] - Companies like Seres, BAIC Blue Valley, and Changan Automobile are adopting HarmonyOS for their smart cockpit systems, while firms like Jilun Technology and Ruiming Technology are developing Harmony-compatible smart home and automotive devices [4] - Core applications such as Meituan, DingTalk, and Weibo have initiated the development of native Harmony versions, with Huawei promoting deep integration of hardware ecosystems through a "gold supplier" mechanism [4] Group 3: Optical Chip Shortage - The global optical chip market is dominated by Lumentum, II-VI, and Broadcom, with production lines concentrated and equipment delivery times exceeding 22 months, leading to an expansion cycle of 2-3 years [5] - The explosion of AI computing power is driving a surge in demand for 1.6T optical modules, CPOs, and data centers, with corresponding demand growth rates of 150% and 40% expected by 2025, making it difficult to alleviate shortages before 2026 [5] - The current optical chip market is experiencing a triple resonance of supply-demand mismatch, domestic substitution benefits, and technological leaps, suggesting a focus on domestic manufacturers with core technological breakthroughs and mature production capabilities for mid-term investment opportunities [5] Group 4: IDC Market Outlook - Despite a recent 20%-40% pullback in the A-share and US stock IDC sectors due to events like Tencent's earnings report, the short-term risks have been sufficiently released as overseas capital expenditure expectations recover and domestic projects are set to materialize in the second half of the year [6] - Major overseas cloud giants like Meta have raised their AI-related capital expenditure guidance, and Microsoft clarified that adjustments in data center leasing are seasonal fluctuations, indicating that global IDC demand remains strong [6] - Domestic restrictions on H20 chip procurement are being absorbed by the market, while breakthroughs in supernode performance by companies like Huawei are accelerating the adoption of domestic computing power chips, benefiting domestic IDC firms [6] - Valuations for leading companies like Data Port and Guanghui New Network have fallen below 20 times EV/EBITDA, returning to the bottom of past boom cycles, indicating strong potential for valuation recovery [6] - The IDC sector is currently in a strategic layout window, with a focus on companies that possess quality clients, capacity reserves, and stable delivery capabilities [6]