2025-10-13 01:00Summary of Conference Call Notes Industry Overview - The report focuses on the optical networking industry in China, specifically companies Innolight, Eoptolink, and TFC Optical. - The industry is expected to experience significant growth driven by 800G technology and the pull-in of 1.6T orders. Key Financial Expectations - Revenue Growth: Anticipated revenue growth of approximately 25%-30% for 3Q25, primarily due to strong demand for 800G products and increased orders for 1.6T technology [1][2]. - Innolight: Expected to report Rmb10.5 billion in revenue and Rmb3.3 billion in net profit for 3Q25, reflecting 29% revenue growth and 37% net profit growth quarter-over-quarter [1]. - Eoptolink: Projected to achieve Rmb8.3 billion in revenue and Rmb3.1 billion in net profit, indicating 30% revenue growth and 31% net profit growth quarter-over-quarter [1]. - TFC Optical: Expected to report revenue of Rmb700 million, with performance likely in line with expectations due to constraints in 200G EML despite strong demand for 1.6T orders [1]. Long-Term Industry Outlook - The long-term outlook for the optical transceiver market remains positive, with improved demand visibility for FY26-27. The industry demand is projected to grow by approximately 43% YoY in FY27, driven by robust demand from Cloud Service Providers (CSPs) and advancements in ASIC technology [1][2]. Valuation and Target Prices - Eoptolink: Target price set at Rmb472, based on a 24.0x FY26E forward PE, reflecting the strong cycle of 800G/1.6T products [7]. - Innolight: Target price established at Rmb569, based on a 25x FY26E forward PE, factoring in margin improvements from higher SiPh transceiver sales [9]. - TFC Optical: Target price of Rmb196, based on a 36.0x FY26E PE, considering the strength of 1.6T products and new customer contributions [11]. Risks to Consider - General Risks: - Slower-than-expected investments in data centers [8][10][12]. - Lower-than-expected capital expenditures on optical networks by telecommunications companies and government entities in China [8][10][12]. - Margin pressures due to price competition [8][10][12]. - Potential impacts from escalating China-US tech disputes [8][10][12]. Conclusion - The optical networking industry in China is poised for significant growth in the upcoming quarters, with key players like Innolight and Eoptolink expected to outperform market expectations. The long-term outlook remains constructive, supported by technological advancements and increasing demand from CSPs. However, investors should remain cautious of potential risks that could impact growth trajectories.