Core Insights - Company reported a slight miss in Q3 2025 earnings expectations, with revenue of 4.03 billion yuan and a net profit of 228 million yuan, reflecting a year-on-year revenue growth of 20.93% but a net profit decline of 11.49% [1] - The company is experiencing a positive trend in internet switch revenue, driven by the delivery of data center products and innovative offerings such as 400G and 800G LPO optical modules [2] - The company has adjusted its profit forecasts for 2025 and 2026 downwards by 5.3% and 8.6% respectively, while maintaining an outperform rating and adjusting the target price down by 13.4% to 97 yuan [3] Financial Performance - For the first three quarters of 2025, the company achieved revenue of 10.68 billion yuan, a year-on-year increase of 27.50%, and a net profit of 680 million yuan, up 65.26% [1] - In Q3 2025, the company’s revenue was 4.03 billion yuan, showing a year-on-year growth of 20.93% but a quarter-on-quarter decline of 2.00% [1] - The gross margin for Q3 2025 improved to approximately 35.56%, a quarter-on-quarter increase of 5 percentage points, attributed to a recovery in the higher-margin campus network business [1] Business Development - The company is seeing a continuous increase in internet switch revenue, with a positive outlook for data center switch business as major internet firms prepare for new procurement rounds [2] - Innovative products such as the 1.6T silicon photonic LPO and ETH 128 supernode have been showcased, indicating the company's commitment to enhancing performance in low power consumption and reliability [2] - A new stock incentive plan has been proposed to motivate key employees, with performance targets set for net profit growth over the next three years [2] Profit Forecast and Valuation - The company has revised its profit forecasts for 2025 and 2026 downwards to 980 million yuan and 1.4 billion yuan respectively, reflecting cautious considerations regarding future expenses [3] - The current stock price corresponds to a P/E ratio of 44.0 times for 2026, with a target price adjustment based on a revised industry valuation [3]

Investment Rating - The report maintains a "Buy" rating for the company [6][10]. Core Views - The company reported a significant increase in net profit and revenue for the first nine months of 2025, driven by the demand from AI data centers, achieving a revenue of 1.068 billion RMB and a net profit of 680 million RMB, representing year-on-year growth of 28% and 65% respectively [6]. - The company is positioned as a leading supplier of data center switches in the internet industry, benefiting from increased capital expenditures from clients and ongoing improvements in operational efficiency [6][9]. - The report anticipates that major internet companies will begin a new round of bidding for data center equipment in 2026, which will further solidify the company's market share [9]. Financial Performance - The company achieved a gross margin of 34.08% in the first nine months of 2025, a slight decrease of 1.42 percentage points year-on-year, attributed to increased competition and cost-cutting demands from clients [8]. - The report forecasts revenue growth for the upcoming years, with projected revenues of 11.699 billion RMB in 2024, 15.153 billion RMB in 2025, and 18.670 billion RMB in 2026, reflecting growth rates of 1.36%, 29.52%, and 23.21% respectively [5]. - The net profit attributable to the parent company is expected to reach 574.08 million RMB in 2024, 1.202 billion RMB in 2025, and 1.735 billion RMB in 2026, with growth rates of 43.09%, 109.36%, and 44.36% respectively [5]. Market Position - The company holds a market share of 20.2% in the Ethernet switch market and 25.6% in the data center switch market, ranking third in China [7]. - The company has maintained its position as the top supplier of 200G/400G data center switches for 14 consecutive quarters [7]. Future Outlook - The report highlights the expected increase in capital expenditures from major internet firms, with ByteDance and Alibaba projected to invest 160 billion RMB and 120 billion RMB respectively in 2025 [9]. - The company has launched a new stock incentive plan to enhance internal operations and motivation among employees [9].