2025-10-14 14:44Summary of Conference Call Notes Industry Overview - The focus is on the Optical Transceiver industry, specifically companies Innolight and Eoptolink. - The upcoming earnings reports for these companies are anticipated between October 23 and 30. Key Points and Arguments Market Conditions - There has been profit-taking pressure following strong share performance year-to-date [1] - Proposed new tariffs on China by the US may have a limited impact on these companies as they primarily ship from Thailand to the US [1] - Upcoming catalysts include CSP customers' results and the OCP Global Summit from October 13 to 16 [1] Innolight Financial Expectations - Expected 3Q net profit of Rmb3.0 billion, representing a 113% YoY increase and 23% QoQ increase [2] - Anticipated gross margin of 43% and net margin of 30% [2] - Key focus on the contribution from 1.6T shipments and improvements in margins [2] Eoptolink Financial Expectations - Expected 3Q net profit of Rmb2.85 billion, reflecting a 265% YoY increase and 20% QoQ increase [3] - Anticipated gross margin of 49.5% and net margin of 40% [3] - Focus on the shipment ramp pace and margin improvements [3] Earnings Estimates Snapshot - Innolight: - Revenue: Rmb9,892 million (+52% YoY, +22% QoQ) - Gross Profit: Rmb4,257 million (+94% YoY, +26% QoQ) - Net Profit: Rmb2,968 million (+113% YoY, +23% QoQ) [4] - Eoptolink: - Revenue: Rmb7,154 million (+198% YoY, +12% QoQ) - Gross Profit: Rmb3,542 million (+255% YoY, +19% QoQ) - Net Profit: Rmb2,853 million (+265% YoY, +20% QoQ) [4] Long-term Growth Outlook - Companies expect a robust long-term growth trend driven by AI [9] - Investors are looking for concrete guidance on the 800G/1.6T volume outlook for 2027E [9] - Positive commentary on 2027 demand could enhance market confidence [9] OCP Global Summit Insights - The summit will showcase new products and technology upgrade trends [10] - Potential introduction of optics in scale-up networks could expand opportunities for optical transceivers [10] Earnings Revisions - Innolight: Revenue estimates raised by up to 14% for 2025-27E, leading to a 3%-14% upward revision in net profit estimates [11] - Eoptolink: Revenue estimates raised by 7%-17% for 2025-27E, with net profit estimates revised up by 7%-16% [12] Investment Thesis - Innolight: - Leading position in 800G/1.6T optical transceivers for AI networking [19] - Strong execution in capacity ramp and product development [20] - Current valuation is appealing based on historical averages [18] - Eoptolink: - Positioned to benefit from 800G/1.6T volume ramp-up [22] - Stock trades at an average level historically, seen as undemanding [22] Risks - Innolight: Risks include slower-than-expected demand for 800G, geopolitical risks, and margin instability [21] - Eoptolink: Risks include slower-than-expected ramp pace, geopolitical issues, and increased competition [23] Conclusion - Both Innolight and Eoptolink are rated as Buy with target prices of Rmb470 and Rmb450 respectively, based on their growth potential and market positioning [21][23]