Stronger into 2026 on 1.6T ramp and SiPh mix

Innolight (300308 CH) Stronger into 2026 on 1.6T ramp and SiPh mix Innolightdelivered strong FY25 earnings,with revenue up 60%YoY toRMB38.2bn, in line with our estimate and Bloomberg consensus, while net profitrose 109% YoY to RMB10.8bn, 1.4% below our forecast but broadly in line withconsensus. GPM improved sharplyto 42.6% from 34.7% in FY24, driven bycontinued strength in high-speed optical module shipments and higher SiPhmix. Momentum accelerated further in 4Q25, with revenue up 102% YoY and30% QoQ, while GPM expanded to 44.5% from 42.8% in 3Q25. We continue toview Innolight as a key domestic AI beneficiary, supported by improving supply-chain readiness, clear leadership inpluggable modules, and further marginupside from deeper SiPh penetration.Maintain BUY, with TPunchanged atRMB707,based on28x 2026E P/E. Target PriceRMB707.00Up/Downside24.2%Current PriceRMB569.41 China SemiconductorsKevin ZHANG(852) 3761 8727kevinzhang@cmbi.com.hk Aaron GUO(852) 3916 3715aaronguo@cmbi.com.hk Capacity expanded by 34% YoY in FY25, while shipments grew 45%,highlightingrobust demand and solid ramp execution.Utilizationimprovedfrom 74%in FY24 to 85%in FY25,while overseas salesaccounted for 92% of revenue and 86% of total shipments. Looking aheadin FY26E, we expect 800G to remain the primary shipment driver, while 1.6Tshould increasingly emerge as the key revenue and GPM growth driver,supported by higher SiPh penetration and a more favorable mix. Mgmt. alsoindicated it has strengthened supply assurance for key materials throughtighter agreements with core suppliers, higher strategic inventory, andbroader vendor qualification, whichwe believe should improve deliveryvisibility and support growth into FY26–27. Stock Data Looking beyond the current ramp, we believe the Company’s productroadmap remains one of the strongest in the sector.Mgmt.sees 800Gand 1.6T as the core demand pillars in FY26, with 1.6T likely to scale muchfaster as adoption broadens across CSPsand AI infrastructure customers.At the same time, the Company is positioning for the next phase of opticalinterconnect demand across scale-up and scale-cross networks, whilecontinuing to advance its 3.2T roadmap across multiple technology paths,includingEML-based and SiPh-based solutions.We expect 3.2Tpluggablemodulesto begintocontributerevenue inFY28E. Maintain BUY, with TPunchanged at RMB707,based on the same 28x2026E P/E. We remain positive on the Company’s earnings outlook, drivenby sustained 800G volume growth,rising 1.6T contribution, and furthermargin upside from deeper SiPh penetration.We liftourFY27Esales/netprofit forecastby 8%/12%as the Company continues to scale capacity tomeet robust demand on top of enhancing cost controls. Source: FactSet Source: Company data, CMBIGMestimates Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in thisreport: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock withpotential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad marketbenchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmarkover next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMBInternational Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The informat