A clear beneficiary of global AI infrastructure capex; remains our top pick in 2026

中际旭创(300308)
    2025 has proven a standout year for optical transceiver suppliers with highAI exposure, with domestic industry leader Innolight delivering stellar 9M25results: Revenue and net profit soared 44%/90% YoY, while 3Q25 gross marginexpanded 9ppt to 43% from a year ago. Strong financials fueled a share pricerally, with Innolight’s stock surging 380%+ YTD as of Dec 11. Looking aheadinto 2026, we double down on AI as one of our key themes, underpinned by anunabated AI infrastructure investment cycle and a sustained mix shift to highervalue solutions (i.e., 1.6T). We reiterate our BUY rating for Innolight and liftour TP to RMB707, driven by an upgraded hyperscaler capex outlook.
    Capex outlook: upward revisions in consensus continue. The US BigFour hyperscalers (Google, Microsoft, Meta, Amazon) ramped capexaggressively: US$230bn in 2024 (+55% YoY), US$259bn in 9M25 (+65%YoY), with 2025 full-year capex projected by Bloomberg consensus to reachUS$367bn (+59% YoY). Bloomberg consensus points to another 35% YoYgrowth in 2026, pushing capex to US$495bn. Despite a modest 14%consensus growth for 2027 and lingering AI bubble debates, we remain bullishthat AI infrastructure investment will continue to grow, with upward revisionpotentials: 2025 Big Four capex growth consensus was 33% in Jan andrevised to 59% in Nov. Historically, post-earnings quarterly adjustments haveconsistently lifted consensus estimates as spending visibility improves.
    Supply chain capacity expansion underway. Mgmt. previously flaggedtight supply of key optical components such as EMLs (electro-absorptionmodulated lasers). Although we expect the tightness to continue into 2026,we believe Innolight is well prepared for the challenges, given capacityexpansions of EMLs and rising SiPho adoptions: Lumentum to increaseunit output by 40% over the coming quarters, despite already being soldout through long-term agreements with downstream leaders.
    The US allowed the exports of Nvidia’s H200 to China on Dec 8: Acatalyst for next AI compute upcycle in China. Per Reuters, the H200delivers ~6x the performance as H20, lifting the compute ceiling for Chinesehyperscalers. This should translate into structurally higher requirements fornetworking components, with Innolight and other leading domestic AI infravendors standing out as key downstream beneficiaries of the highercompute baseline.
    Reiterate BUY on Innolight, with TP adjusted to RMB707, based on thesame 28x 2026E P/E, at a premium to historical 5-year avg (27x) given itsabsolute leadership in the optical transceiver industry. We revise up ourrevenue forecasts by 14% for 2026 on higher consensus capex fromprevious updates (21% upward revision in November). We also lift GPM to46.2% (vs. prior 44.3%), given a favorable mix shift towards 1.6T and risingadoption of SiPho and margin resilience given persist tightness of supplychain. Potential risks include lower capex, geopolitical uncertainties, andlower price due to competition.