TL;DR
· Nomura raised its target price for Zhongji Innolight from 1,015 yuan to 1,325 yuan, implying 20.6% upside from the July 6 close.
· Target based on 2027 EPS of 66.06 yuan and 20x P/E, betting on 1.6T and higher-speed optical module volume.
· This forecast is significantly above Wind consensus; supply chain bottlenecks, customer demand realization, and double ordering remain risks.

According to a July 7 report from Caixin via Tonghuashun, Nomura maintained a "Buy" rating on Zhongji Innolight and raised its target price from 1,015 yuan to 1,325 yuan. Based on Zhongji Innolight's closing price of 1,098.92 yuan on July 6, the new target implies about 20.6% upside.

The most important change in this upgrade is not the valuation multiple but the earnings forecast. Based on the original report, the 1,325 yuan target is derived from 2027 EPS of 66.06 yuan and a 20x P/E. The 20x P/E is roughly in line with the median level of Wind's China A-share tech and electronic components sector, while Zhongji Innolight currently trades at about 16.6x 2027 estimated P/E.

For investors, what the report truly elevates is the upper limit of AI datacenter optical module demand. Zhongji Innolight's core narrative remains the upgrade of high-speed optical modules—from 800G to 1.6T, then to 2.4T, 3.2T, and further out to NPO/CPO form factors. Nomura believes this upgrade path will push the company's revenue and profit after 2027 significantly above market consensus.

Target raised to 1,325 yuan, driven by upward revision of 2027 earnings

According to the original report, Zhongji Innolight's FY2027 revenue forecast was raised to 1.6T yuan, and net profit attributable to parent was raised to 1.6T yuan. The adjustments for FY2028 are even larger, with revenue raised to 2.4T yuan and net profit attributable to parent raised to 3.2T yuan.

This is not just betting on short-term order improvements, but bringing forward or enlarging the entire volume ramp of higher-rate products in 2027-2028.

Profit margin assumptions were also raised. The original report raised FY26-28 gross margin forecasts to 45.7%-46.2%, with operating margins maintained around 34.5%-35.0%. The logic behind this is that as the proportion of high-end products like 1.6T and silicon photonics increases, product mix improvements can offset some price pressure.

The adjustments to FY26-28 revenue, net profit, and gross margin forecasts are the main basis for the 1,325 yuan target price.

The direct source of the target price hike lies here. The valuation multiple remains unchanged at 20x 2027 EPS. What changed is the 2027 EPS, raised from 50.87 yuan to 66.06 yuan. The 1,325 yuan target mainly comes from the upward revision of earnings forecasts, not from a more aggressive valuation.

After 1.6T, 2.4T and 3.2T follow; optimistic assumptions significantly exceed consensus

The biggest assumption supporting the earnings upgrade is the continued increase in shipments of high-speed optical modules for AI datacenters.

According to the original report, global 800G optical module shipment forecasts were raised to 55 million units in 2027 and 78 million units in 2028. 1.6T shipment forecasts were raised to 71.5 million units in 2027 and 126 million units in 2028. More critically, the report includes higher-speed product assumptions for the first time: 2.4T shipments of 2 million units in 2027 and 5 million units in 2028, and 3.2T shipments of 2 million units in 2028.

These numbers correspond to continued expansion of cloud vendors' AI clusters. As GPU counts increase, the demand for high-speed optical modules between servers, racks, and within datacenter networks grows simultaneously. For optical module makers, speed upgrades usually mean higher unit prices, technical barriers, and customer certification thresholds, making it easier for leading firms to widen the gap.

Nomura expects Zhongji Innolight to maintain a 30%-35% market share in the global AI datacenter optical module market. If this market share assumption holds, upward revisions in industry shipments will directly flow into the company's revenue. If the share of high-end products rises smoothly, profit margins will also be supported.

Disagreement also lies here. According to the original report, Zhongji Innolight's FY26-28 revenue forecasts are 32%-67% higher than Wind consensus, and net profit forecasts are 14%-38% higher. Specifically, the FY2027 revenue forecast is 261 billion yuan, while Wind consensus is about 163.6 billion yuan. By FY2028, revenue forecast is 67% higher than consensus and net profit 38% higher.

Nomura vs. Wind consensus comparison shows that the 2027 revenue forecast is 60% higher than consensus, and the 2028 revenue forecast is 67% higher than consensus.

Behind the 1,325 yuan target price is a more optimistic assessment of demand, market share, and product upgrades than the market average. Whether it can be realized depends on whether major customers continue to increase AI capex and whether product transitions after 1.6T proceed as expected.

NPO/CPO are long-term stories, not yet counted as realized revenue

Beyond 1.6T, NPO and CPO are seen as sources of growth after 2028.

In simple terms, traditional pluggable optical modules face pressures on power consumption, bandwidth density, and heat dissipation as AI cluster scales grow. NPO and CPO attempt to bring the photoelectric conversion module closer to the switch chip, reducing transmission loss and improving overall efficiency. If such architectures are adopted on a large scale, leading optical module makers may still participate in new product forms and supply chain divisions.

Including NPO/CPO in the long-term growth narrative indicates that the growth story does not end with 1.6T volume. After 2.4T, 3.2T, and new packaging forms advance, the revenue curve beyond 2028 still has upside imagination space.

However, this cannot be written as a certainty. NPO/CPO still involves issues such as customer architecture choices, switch chip coordination, thermal management, yield, and cost. Even if the technical direction is clear, the pace of large-scale adoption may be slower than optimistic assumptions. For stock prices, such long-term products are more like valuation support than confirmed revenue already in financial statements.

A chart of the 12-month forward P/E multiple range, usable with the 1,325 yuan target price and 20x 2027 P/E assumption.

Supply chain is not yet fully relaxed; double ordering could also backfire on orders

Short-term constraints are mainly in the upstream supply chain.

Tightness may still appear in areas such as InP wafers, MOCVD equipment, and 200G EML, due to yield ramps, equipment delivery cycles, and supply chain disruptions. Public reports mentioned that Nomura expects Zhongji Innolight's Q2 2026 earnings to grow about 20%-22% quarter-on-quarter. But whether the supply chain can continue to support higher shipments will still affect near-term earnings realization.

In the long term, capacity expansion may alleviate some shortages. JX Advanced Metals announced on June 16 that it plans to invest up to 120 billion yen over the next four years to expand InP substrate capacity. Combined with existing investment plans, the capacity target around FY2030 is about 7-10 times that of FY2025. However, there is still a time gap from capacity planning to stable supply, and high-end materials and devices must pass yield, customer certification, and volume delivery tests.

Another risk is double ordering. In a high-cycle AI infrastructure chain, customers tend to lock in orders early, double order, or suppliers overestimate real demand. Once cloud vendors adjust their capex pace, order visibility can change quickly, and inventory and price pressures can pass upstream.

The meaning of the 1,325 yuan target price is not that the stock will definitely rise another 20%, but that Nomura's optimistic valuation result is based on higher shipments, better product mix, and upward revision of 2027 EPS. Zhongji Innolight remains one of the most watched core names in the AI optical module chain, but the current disagreement has converged on one question: will demand and profit margins after 1.6T materialize at a more aggressive pace than market consensus?

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