Key Takeaways:
- 2Q26 net profit RMB7.917B beats broker estimates on 800G/1.6T shipments
- HK shares surge 19.6% to HKD1,203 after Goldman initiates Buy at HK$3,267 TP
- CSP order visibility extends through 2027, some customers guide 2028
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Zhongji Innolight 2Q profit beats on 800G optical module demand
Zhongji Innolight's 2Q26 net profit of RMB7.917 billion beat broker expectations as 800G/1.6T optical module shipments to cloud customers accelerated.
"Management said the company continued actively shipping 800G/1.6T products in 1H26, with both recording quarter-on-quarter growth," BOCOM International said in a research note. The broker maintained its Buy rating on the Shenzhen-listed shares while cutting the target price to RMB1,488, corresponding to 30x 2027 earnings versus the previous 32x multiple.
Revenue for the quarter reached RMB22.28 billion, in line with expectations, while gross margin expanded 0.4 percentage points quarter-on-quarter to 46.4 percent. The R&D expense ratio fell 1 percentage point to 2.3 percent after one-off research costs were absorbed in 1Q26. Positive returns from upstream equity investments also lifted the bottom line.
The earnings beat triggered a 19.6 percent surge in Zhongji Innolight's Hong Kong-listed shares to HKD1,203, with turnover reaching HKD4.479 billion, after Goldman Sachs initiated Buy coverage with a target price of HK$3,267. Goldman's net profit forecasts for 2026 and 2027 run 25 percent and 42 percent above consensus, respectively, reflecting expectations for silicon photonics leadership and accelerated 1.6T mass production.
Management said visibility for major cloud service provider orders extends through 2027, with some customers already providing order guidance for 2028. BOCOM adjusted its 2026-2028 revenue forecasts to RMB97.03 billion, RMB156.81 billion and RMB207.88 billion, while trimming gross margin projections to 47.0 percent, 48.5 percent and 48.3 percent on rising upstream material prices.
The results show sustained demand for high-speed optical modules as frontier AI models scale. China Galaxy Securities noted that OpenAI's GPT-6 Astra release confirms model training is advancing from 10^26 to 10^27 FLOPs, with 800G/1.6T and future 3.2T optical modules among the most direct beneficiaries. Peer optical communication stocks also rallied, with Cambridge Industries gaining 14.74 percent and Yangtze Optical Fibre and Cable rising 4.33 percent.
The beat signals that Zhongji Innolight's scale advantages and key supplier relationships with major CSP customers may give it an edge in securing production capacity as demand accelerates. Investors will watch whether gross margin pressure from upstream material costs persists through the second half and how 1.6T ramp-up translates into 2027 order momentum.
This article is for informational purposes only and does not constitute investment advice.
