After Zhongji Innolight Co.,Ltd. (300308.SZ) released its 2026 third-quarter results, Nomura, Bank of America, Citi and Goldman Sachs all issued research reports on the company in quick succession.
All four institutions maintained a "Buy" rating, yet they diverged sharply on target prices, valuation multiples and earnings outlook.
In late October, Zhongji Innolight Co.,Ltd. reported its 2026 Q3 scorecard: quarterly revenue of RMB 27.769 billion, up 171.8% year on year and up 24.6% quarter on quarter; net profit attributable to shareholders of RMB 8.587 billion, up 173.7% year on year but only up 8.5% quarter on quarter.
Breaking down the numbers, after excluding non-recurring gains and losses, the company's recurring net profit reached RMB 9 billion, up 190% year on year and up 22.3% quarter on quarter, showing continued operational resilience.
However, a gap emerged between reported profit and core profit, mainly due to two one-off losses: a foreign exchange loss from the H-share IPO and a fair value impairment from an upstream strategic investment.
After the earnings disclosure, Nomura, Bank of America, Citi and Goldman Sachs concentrated their revaluation of Zhongji Innolight Co.,Ltd. between October 29 and November 2: all four maintained "Buy" ratings, but A-share target prices ranged from RMB 1,196 to RMB 2,405, a spread of more than double, indicating that the debate over its valuation center far exceeds disagreement over the results themselves.
Ratings unanimously kept or reiterated at Buy, targets differ by a factor of two
Nomura on October 29 cut its target price on Zhongji Innolight Co.,Ltd. from RMB 1,375 to RMB 1,196, the most bearish move, while keeping its "Buy" rating.
Nomura lowered its 2027 valuation multiple from 21x to 18x, aligning with the median PE of China's optical communications sector.
At the same time, Nomura raised its 2026-2028 revenue forecasts for the company by 7-11% and its net profit forecasts by 0-8%.
It believes the company is likely to maintain roughly 30% global market share in 100G+ optical modules, but rising upstream raw material prices will pressure gross margins.
Bank of America cut its target price from RMB 1,650 to RMB 1,325, reiterated its "Buy" rating, and said Q3 reported profit was below expectations but, excluding distorting factors, operating performance was in line with expectations.
Citi assigned an A-share target price of RMB 1,212 (previously RMB 1,325) and an H-share target price of HKD 1,394 (previously HKD 1,524), maintaining "Buy."
The 15.8x PE is one standard deviation below the company's historical valuation level, the most conservative valuation assumption among the four institutions.
Goldman Sachs also maintained "Buy," cutting its A-share target price from RMB 2,645 to RMB 2,405 and its H-share target price from HKD 3,267 to HKD 2,829, but its target remains significantly above those of the other three institutions.
Although Goldman Sachs lowered its 2026-2028 net profit forecasts for Zhongji Innolight Co.,Ltd. by 6-17%, it still assigned a very high valuation premium.
The four institutions gave a 2027 EPS (earnings per share) range for Zhongji Innolight Co.,Ltd. of RMB 66.45 to RMB 76.95, a limited gap, but against the backdrop of a broad sector pullback, clear valuation divergence has emerged among the institutions.
Some foreign institutions are moving Zhongji Innolight Co.,Ltd. toward the average of the A-share industry sector, while others still assign growth premium space based on the PEG framework of global technology peers.
Foreign institutions share a consensus on optical module fundamentals and AI, but see short-term constraints as unavoidable
Although market concerns over the prosperity of the AI supply chain and overseas regulatory risks have continued to build recently, foreign investment banks still hold a positive outlook on Zhongji Innolight Co.,Ltd.'s core business prospects.
According to the "Investor Relations Activity Record (Conference Call Minutes)" disclosed by Zhongji Innolight Co.,Ltd. on the Shenzhen Stock Exchange, management said orders from leading overseas cloud service customers have been locked in through 2027, with some customers already providing 2028 demand guidance, so most foreign investment banks generally believe the company's leading position remains solid.
Nomura believes that against the backdrop of a shortage of component supply across the industry, Zhongji Innolight Co.,Ltd.'s Q3 results were solid, order visibility extends into 2027, and the next-generation product upgrade path is clear, and it expects the company to maintain a stable roughly 30% share of the global 100G-and-above optical module market.
Nomura also pointed to five real variables facing the company: 1. Supply chain cost risk. It believes geopolitical risk could trigger supply chain volatility and push up upstream costs. 2. Competitive landscape risk. It believes Marvell's acquisition of Lumentum could increase uncertainty in the industry's competitive landscape. 3. Demand-side risk. It believes demand for high-end optical modules in the datacom and telecom markets may fall short of expectations. 4. Price competition risk. Price wars in the 800G/1.6T segment could escalate and affect the company's overseas exports. 5. Technology iteration risk. Upgrades of 800G/1.6T, 3.2T and silicon photonics products could progress slower than expected.
Currently, 800G and 1.6T are the main revenue drivers for Zhongji Innolight Co.,Ltd.; 2.4T and NPO may begin small-scale ramp-up in 2027 with gradually rising share; 3.2T is still small in the revenue structure corresponding to the company's Q3 results.
Bank of America's view is broadly similar, believing 800G and 1.6T optical module shipments will still see considerable growth in 2027; new technology products such as 2.4T / NPO / XPO will begin shipping in the second half of 2027 and contribute materially to revenue in 2028.
But Bank of America also flagged two risks. First, component shortages; it has cut its 2026 global 1.6T optical module shipment forecast from 20 million units to 17 million units. Second, competition in the 800G segment will intensify after entering 2027.
In addition, Bank of America lowered the company's 2027 PE from 20x in the previous version to 18x, slightly below the company's historical average PE of 19x since 2021.
Bank of America attributed the valuation cut to concerns over AI supply chain risk and potential U.S. FCC regulatory restrictions.
Goldman Sachs's medium- to long-term earnings forecasts for Zhongji Innolight Co.,Ltd. are significantly above market expectations, and its target PE multiple, after a slight reduction, remains 34.5x (versus 35.6x in the previous report).
It believes the new generation of AI server racks is driving accelerated volume growth in 1.6T optical modules, and that the company leads in high-speed optical module market share, is making smooth progress on new products, and has stronger supply assurance capability; with a clearer macro environment, it is more optimistic on AI capital expenditure.
Citi: Bearish scenario puts the lowest A-share target for Zhongji Innolight at RMB 469, implying 19% downside
Citi forecast 2027 fiscal year EPS using a 15.8x PE, versus 16.2x in the previous report.
Citi explained that 15.8x is one standard deviation below the company's three-year historical average PE, and it applied the same "historical average downgrade" valuation methodology to Eoptolink.
Citi believes the valuation discount reflects market concerns over U.S. FCC regulatory policy.
At the same time, Citi provided three sets of PE and target prices under Bull, Base and Bear scenarios.
The prerequisites for the optimistic forecast are assumptions that 800G/1.6T shipments, ASP and gross margins exceed expectations, while the pessimistic forecast assumes shipments, ASP and gross margins fall short of expectations.
Citi believes A-share Zhongji Innolight Co.,Ltd. has a lowest downside target of RMB 469, implying 19% potential decline; and a highest upside target of RMB 1,918, implying 230% potential gain. (Based on the October 29 share price.)
A-share scenario Bull: 25x 2027E PE (five-year average); target price RMB 1,918, upside 230%. Base (used in the report): 15.8x 2027E PE (three-year average minus one standard deviation), target price RMB 1,212, upside 108%. Bear: 8.7x 2027E PE (lowest valuation in a downcycle), target price RMB 469, downside -19%. H-share scenario Bull: 25x PE, target price HKD 2,205, +212%. Base: 15.8x PE, target price HKD 1,394, +97%. Bear: 8.7x 2027E PE, target price HKD 539, -24%.
Secondary market share prices have already priced in multiple concerns in advance.
As of the end of October, Zhongji Innolight Co.,Ltd.'s share price corresponded to a 2027 expected PE of only around 9-10x, far below the teens multiples assigned by foreign institutions.
In the future, foreign investment banks will focus on whether the company can deliver in Q4 on orders deferred by Thailand flooding; the pace of improvement in optical chip and DSP supply; whether ASPs for 800G/1.6T products deteriorate; and, most critically, whether 2.4T and NPO next-generation optical modules can smoothly achieve large-scale mass production in the second half of 2027 and deliver a high-margin product mix upgrade.
Comments