Summary of Conference Call Notes Industry Overview - **Industry**: Optical Transceiver - **Companies**: Innolight and Eoptolink Key Points and Arguments 1. **Earnings Estimates Revision**: EPS estimates for Innolight and Eoptolink have been raised due to three factors: - Tight capacity benefiting both companies due to scale advantages and leadership in silicon photonics, particularly for Innolight [1] - Removal of near-term tariff overhang improving shipment outlook [1] - Slower ASP decline than previously estimated, now projected at 15% instead of 20% for 2025-27E [1] 2. **Shipment Projections**: Innolight's shipments are expected to increase by up to 36%, with ASP decline factored in [1] 3. **Target Prices**: - Innolight's 12-month target price raised to Rmb392 - Eoptolink's target price raised to Rmb398 [1] 4. **Supply Dynamics**: - Focus on capacity ramp pace at Innolight/Eoptolink, EML supply dynamics, price negotiations for 2026, and suppliers' comments on 2027 demand [2] 5. **Long-term Growth Prospects**: - More constructive outlook on long-term growth, with rising content supporting better sustainability [3] - Spending on transceivers per dollar spent on GPU is expected to rise from $0.07 to $0.12 as new generations are introduced [3][17] 6. **Valuation and Risk-Reward Analysis**: - Eoptolink and Innolight shares trade at 19x/23x 2026E P/E and 15x/18x 2027E P/E, which is considered undemanding [4] - Scenario analysis indicates potential share price upside of 101% for Innolight and 111% for Eoptolink in a bull case, with downside risks of 34% and 38% respectively in a bear case [4][40] 7. **Competitive Position**: - Innolight and Eoptolink are expected to maintain market share despite US-China trade tensions, benefiting from production capacity and product development efficiencies [8][9] 8. **Production Capacity**: - Significant capacity built in Thailand for both companies, which is advantageous due to tariff exemptions for shipments to the US [10] 9. **Revenue Growth**: - Innolight's net profit projected to peak at Rmb40 billion in 2029E, while Eoptolink's net profit expected to peak at Rmb36 billion in the same year [25][39] 10. **Future Product Upgrades**: - Anticipated upgrades to 1.6T and 3.2T products are expected to drive revenue growth and sustainability [16][24] Additional Important Insights - **Employee Growth**: Innolight leads in employee numbers in non-China production bases, indicating strong production capacity [11] - **Quarterly Revenue Growth**: Innolight and Eoptolink have shown growth rates on par with or above global peers, suggesting no significant share loss [13] - **Long-term Earnings Outlook**: Earnings for both companies are expected to peak in 2029E, with a slower ramp for 3.2T products due to potential cannibalization from CPO technology [23][33] This summary encapsulates the critical insights from the conference call, highlighting the positive outlook for Innolight and Eoptolink in the optical transceiver market, driven by supply dynamics, product upgrades, and strategic positioning amidst competitive pressures.

Summary of Conference Call Records Industry Overview - The conference call discusses the optical communication sector, focusing on two companies: Lumentum (LITE) and Coherent (COHR) [1][2]. Key Points from Lumentum (LITE) - **Revenue Growth**: LITE reported a 55.9% year-over-year increase in revenue to USD 480.7 million for 4QFY25, with a turnaround to a GAAP net income of USD 213.3 million from a net loss of USD 252.5 million a year prior [2][4]. - **Future Guidance**: Management provided guidance for 1QFY26E revenue between USD 510 million and USD 540 million, indicating a quarter-over-quarter growth of 6% to 12% and a year-over-year growth of 51% to 60% [2][4]. - **Product Demand**: Strong demand from hyperscale cloud customers is driving growth, particularly in the Cloud and Networking segment, which saw a 67% year-over-year increase [2][4]. - **EML Chip Shipments**: Achieved an all-time high in EML chip shipments, nearly doubling revenue compared to the previous year. Transitioning from 3-inch to 4-inch wafers to increase capacity, with potential future moves to 6-inch wafers [4]. - **Major Orders**: Received a substantial order for 200G EML chips, expected to be fulfilled in the December quarter, with 2026 anticipated as a breakout year for 100G and 200G laser chip shipments [4]. - **OCS Expansion**: Expanding Optical Circuit Switch (OCS) capacity in Thailand, with leadership in optical performance expected to capture demand ahead of competitors [5]. Key Points from Coherent (COHR) - **Revenue Performance**: COHR recorded a 16.4% year-over-year revenue growth in 4QFY25, reaching USD 942 million in the data center and communications segment, which contributed 62% of total revenue [6][7]. - **Guidance Shortfall**: Management's guidance for 1QFY26 revenue between USD 1.46 billion and USD 1.60 billion indicates an 8% to 18.6% year-over-year growth, but this fell short of market expectations [6][7]. - **Transceiver Development**: The company began shipments of its 1.6T transceiver in 4QFY25, with expectations for meaningful revenue contributions in FY26. Development of 3.2T transceiver products is ongoing [7]. - **Divestiture Strategy**: The divestiture of the Aerospace & Defense business for USD 400 million is a strategic move to streamline COHR's portfolio, expected to close in 1QFY26 [7]. Additional Insights - **Market Dynamics**: The strong demand for AI infrastructure from global hyperscale AI and cloud players is expected to support sequential growth for optical transceiver players in China [1]. - **Supply Chain Considerations**: Continued supply tightness of key components, particularly optical chips, may benefit optical chip manufacturers [1]. This summary encapsulates the essential insights from the conference call, highlighting the performance and strategic outlook of Lumentum and Coherent within the optical communication industry.