Key Takeaways:
Everbright Securities initiated coverage on optical module maker Cambridge Technology (06166) with a 'Buy' rating, forecasting the company’s net profit will surge 686% this year as demand for high-speed data center components accelerates.
The bank’s bullish thesis rests on the company’s 800G optical modules having already reached mass shipment to core clients, with next-generation 1.6T modules expected to enter mass production before the end of 2026, the research report stated.
Everbright predicts Cambridge’s net profit will reach 2.072 billion yuan in 2026, climbing to 3.333 billion yuan in 2027 and 5.259 billion yuan in 2028. Based on its May 22 closing price of 142.7 HKD, the stock trades at a forward price-to-earnings ratio of 21x for 2026, which the bank noted is below comparable companies in the sector.
The rating highlights the intense demand for high-speed interconnects driven by the global build-out of AI infrastructure. As tech giants like Meta spend billions on data centers, the entire supply chain for essential components, from high-bandwidth memory to optical modules, is struggling to keep up, creating a significant opportunity for suppliers like Cambridge that can deliver at scale.
A key factor in Everbright's positive assessment is Cambridge's successful expansion of its factory in Malaysia, which has passed certifications from major customers. This move helps mitigate geopolitical risks and addresses production bottlenecks that have plagued the industry. By securing its supply of upstream materials like optical chips, the company is better positioned to meet the surge in orders.
The broader electronics industry has seen major component brands like Corsair turn to Chinese manufacturers for critical parts like DRAM to navigate shortages caused by AI-related demand, as reported by The Next Web. This trend shows that production capacity and availability are becoming the most critical competitive advantages.
The upgrade suggests Cambridge Technology is successfully capturing the overflow demand for AI hardware that has left giants like Samsung and SK Hynix capacity-constrained. While the US has restricted China's access to cutting-edge EUV lithography, the production of optical modules and other essential data center components does not require these advanced processes, allowing Chinese firms to aggressively expand in these critical market segments.
The initiation marks a vote of confidence in Cambridge's ability to execute on its production roadmap. Investors will be closely watching for the company to hit its 1.6T module mass production milestone later in 2026, which would confirm its position as a key supplier in the AI arms race.
This article is for informational purposes only and does not constitute investment advice.
