Where to start:
CICC has released a research report initiating coverage on XIZHI TECH-P (01879) with an Outperform rating and a target price of HK$362. This valuation is based on a P/S method, applying a 17x multiple to 2028 estimated revenue. The firm identifies the company as a global leader in optical computing and a domestic frontrunner in Scale-up optical interconnect solutions, and it is optimistic about its long-term growth driven by the dual engines of optical computing and optical interconnect.
The report suggests that XIZHI TECH-P is a global leader in optical computing, with this segment representing a key source of long-term growth. Potential catalysts include the volume ramp-up of its Scale-up NPO solutions and the expansion of commercial applications for its PACE 3 product.
Why just 10 ASX 200 shares?
Leveraging its fully self-developed optoelectronic chip technologies (oMAC, oNOC, and oNET), XIZHI TECH-P has established a dual-engine growth path: optical computing to push the ceiling of long-term computing efficiency, and optical interconnect to meet the expanding needs of AI cluster scaling. The company's revenue grew at a compound annual rate of 67% from 2023 to 2025. In 2025, total revenue was RMB 106 million, with optical interconnect and optical computing contributing 79% and 21%, respectively. XIZHI TECH-P ranked first among independent Scale-up optical interconnect solution providers in China in 2025. As of 2024, it had the highest cumulative global shipments of optical computing chips.
The optical interconnect business is expected to benefit from the accelerated development of domestic supernode architectures. As the single-card performance of domestic AI chips still lags behind overseas counterparts, efficient Scale-up networks are increasingly needed to improve overall cluster computing power utilization and alleviate single-chip performance bottlenecks. Optical interconnect solutions are experiencing faster penetration. XIZHI TECH-P currently has a full product matrix in the optical interconnect field, ranging from EPS and distributed OCS to NPO and CPO, and its commercialisation progress is at the forefront of the industry. The report believes this segment can fully capitalise on the development of domestic supernodes.
Supply chain positioning:
The company has established a stable and diversified supply chain system. Its core optical interconnect and optical computing products are primarily based on mature processes and widely available components, not relying on advanced process nodes. Following the U.S. export controls in Q4 2024, the company successfully transitioned subsequent projects to domestic manufacturing partners.
Earnings forecast and valuation:
CICC forecasts revenues of RMB 214 million, RMB 494 million, and RMB 1.726 billion for 2026, 2027, and 2028, respectively. It estimates EPS of -RMB 10.03, -RMB 6.06, and -RMB 1.83 over the same period, with losses narrowing each year. With an Outperform rating, the current share price corresponds to a 13x P/S on 2028 estimates. Referencing comparable company valuations, CICC sets a target price of HK$362 based on a 17x P/S for 2028, implying a 55% upside potential.
Risks:
Risks include product commercialisation falling short of expectations, customer demand fluctuations and concentration risk, rapid technology iteration and R&D progress falling short of expectations, competition from alternative technologies like electrical interconnects, dependency on supply chain and third-party manufacturing, and the risk of continued losses and profitability improvement falling short of expectations.
Comments