Summary of Zhongji InnoLight and Optical Transceiver Industry Conference Call Company Overview - **Company**: Zhongji InnoLight (300308.SZ) - **Sector**: Technology - **Ticker**: 300308 CH - **Current Price**: CNY 649.00 (as of January 30, 2026) - **Rating**: Buy - **Target Price**: CNY 799.00 Key Points from Zhongji InnoLight's FY25 Preliminary Results - **Earnings Guidance**: Earnings attributable to the parent company are projected to be between CNY 9.8 billion and CNY 11.8 billion, representing a year-on-year increase of 89.5% to 128.17% [1] - **Mid-Point Earnings**: The mid-point of CNY 10.8 billion exceeds the analyst's estimate of CNY 10.3 billion by 5% [1] - **Optical Transceiver Segment**: This segment is expected to generate a net profit of CNY 10.8 billion to CNY 13.1 billion, reflecting a year-on-year growth of 90.8% to 131.4% before share incentive costs [1] - **4Q25 Earnings Guidance**: Projected earnings for 4Q25 are between CNY 2.67 billion and CNY 4.67 billion, indicating a year-on-year growth of 88% to 229% and a quarter-on-quarter growth of -15% to +49% [1] - **Quarterly Growth**: The mid-point estimate of CNY 3.67 billion suggests a 17% quarter-on-quarter growth, which is 16% higher than the analyst's forecast for 4Q25 [1] - **Market Demand**: Growth is attributed to increased demand for 800G and 1.6T transceivers, with the company expected to maintain a leading market position in a supply-constrained environment [1] Industry Insights - **Adoption of 1.6T Transceivers**: The accelerated adoption of 1.6T transceivers and Silicon Photonic migration is anticipated to support sustainable growth and margin expansion for the company [2] - **Supply Chain Bottlenecks**: Potential bottlenecks in the supply chain for components like isolators and Faraday rotators may arise due to tight supply from key suppliers [2] - **Competitor Performance**: Eoptolink (300502 CH), another optical transceiver supplier, reported FY25 preliminary results with a net profit guidance of CNY 9.4 billion to CNY 9.9 billion, indicating a year-on-year increase of 231.2% to 248.9% [3] - **Market Concerns**: The re-acceleration of earnings growth in Eoptolink for 4Q25 may alleviate market concerns regarding slowing demand in the optical transceivers market [3] Financial Metrics - **Target Price Justification**: The target price of CNY 799 is based on a 35x FY26F EPS of CNY 22.8, aligning with the median P/E range of China's A/H optical communication sector [2] - **Current Valuation**: The stock is currently trading at 28.5x FY26F EPS [2] Risks - **Demand Risks**: Risks include weaker-than-expected demand for high-end optical modules in datacom and telecom markets [12] - **Competition**: Intense competition in the 400G and 800G optical modules segments may impact performance [12] - **Product Upgrade Delays**: Slower-than-expected product upgrades could hinder growth [12] - **Price Wars**: Escalated price wars may affect the company's export capabilities [12] This summary encapsulates the key insights and financial metrics from the conference call, highlighting both the company's performance and the broader industry context.