---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 189691
conversation_id: 1d4b176b-7e6e-4447-a270-d999106fe4a3
citations: 14
created: 2026-05-31 21:55:05Z
---

# What catalysts could drive upside/downside for Zhongji Innolight in the next 12–18 months?

# Zhongji Innolight (300308 CH) — 12-18 Month Catalyst Map

**Anchor view:** CLSA (Tony Zhang / Chris Liu) rates **Outperform** with TP **Rmb102.6** based on **13x 26CL EPS** (cut from 18x), reflecting a balance between strong 1.6T/800G ramp and longer-term CPO substitution risk [2][5]. Note CLSA corpus latest dated April 23, 2025 [1]; we triangulate with Innolight's own IR calls dated Oct 2025, April 2026 and May 2026 from public disclosures.

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## I. Upside Catalysts (Bull Case)

### 1. 1.6T Ramp From 2Q25 → Inflection Through 2026-2027
Innolight management on 1Q25 call confirmed 1.6T shipment ramp from 2Q25 with hyperscaler clients adopting 1.6T transceivers in Ethernet networks **from 2026** [3]. CLSA models 1.6T to grow from **2% of revenue in 2024 → 19% in 2025 → 40% in 2026 → 45% in 2027** [6]. By the 3Q25 IR meeting (Oct 30, 2025), management stated *"key clients began deploying 1.6T in 3Q25 and orders continue to grow…other key clients expected to deploy 1.6T at large scale in 2026-2027"* [7]. By 1Q26 management said *"800G and 1.6T are both ramping in 1Q26, with gross margin climbing further"* [9], and in May 2026 reaffirmed *"1.6T products continue to ramp"* with full order books [10]. **Trigger to watch:** 1.6T mix exceeding 25-30% of revenue in any given quarter would compress the bear-case CPO risk in valuation.

### 2. EML / Optical Chip Supply Easing → Volume Unlock
1Q25 results were "**dragged by continued component supply shortage in 100G electro-absorption-modulated laser (EML) and delay of 1.6T products**" [1]. CLSA expects EML shortage to ease in 2Q-3Q25 with supplier capacity expansion and silicon photonics (SiPh) penetration [3]. As of Oct 2025 the company acknowledged *"optical chip tightness remains relatively high due to rapid demand growth"* but said it has pre-locked materials [8]. **Trigger:** any sequential expansion in shipments above the stated 15-20m unit 800G guide would directly flow through to upside.

### 3. Silicon Photonics Mix-Up & Margin Expansion
CLSA models segment gross margin: 800G 36.3% (2025) and 1.6T at **38%** vs blended 33.9% [6]. Management has flagged that SiPh penetration in 800G/1.6T is a primary margin lever — *"silicon photonics is recognized and validated by key clients…SiPh ratio in 800G and 1.6T expected to keep rising"* alongside yield improvement and product mix [9]. Q3 2025 actual gross margin already reached **43%** vs CLSA's full-year 2025 model of 33.9% — a material positive surprise relative to the anchor model.

### 4. Thailand Capacity as Tariff Insulation
Tariff risk on US-bound shipments is **structurally mitigated** because the Thailand factory currently faces **no US tariffs on transceiver exports**; company is actively expanding Thailand capacity to absorb US client demand [4]. May 2026 IR notes confirmed *"Thailand capacity continues to expand"* with on-hand orders ample [10]. **Trigger:** if Section 301 / "small yard, high fence" carve-outs explicitly preserve Thailand transceiver duty exemption, this de-risks the largest single overhang in CLSA's bear case.

### 5. Scale-Up / LPO / XPO / NPO Optical Connect Adoption (Beyond Scale-Out)
A new TAM is emerging: management states *"Scale-up bandwidth demand is growing very fast, potentially 10x scale-out bandwidth requirements"* with CSPs pushing ASIC chips in scale-up, driving demand for LPO/XPO/NPO solutions; deployment **expected from 2027** [12]. This is incremental to the consensus scale-out optics narrative and adds another speed/SKU ramp on top of the 1.6T cycle.

### 6. Domestic Hyperscaler Demand (Diversification Away From US Concentration)
CLSA notes *"strong domestic hyperscalers demand for 400G in 2025-2026, who may also commence adopting 800G transceivers from 4Q25"* [3]. Innolight's 1Q25 IR commentary confirmed *"advancement of domestic AI applications is driving increased demand for computing power infrastructure"* and the company is intensifying domestic investment [14]. This reduces reliance on a single overseas customer and provides a hedge against US capex normalization.

### 7. Market Size & Industry Tailwind
Innolight's own interim report cites **Lightcounting** projecting 800G and 1.6T to *"see rapid ramp in 2026; combined market size of 800G + 1.6T Ethernet optical modules to exceed US$22bn by 2030"* [11], with 1.6T alone growing from ~US$2bn (2025) → ~US$10bn (2030).

### 8. HK Listing / H-Share Issuance
Per May 2026 IR, the company has submitted an H-share issuance plan, with the CSRC filing and HKEX listing committee process described as *"steadily progressing"* [10]. A successful HK listing could broaden the investor base, raise the global float, and re-rate valuation toward HK-listed AI infrastructure peers.

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## II. Downside Catalysts (Bear Case)

### 1. Co-Packaged Optics (CPO) Substitution — The Multi-Year Structural Risk
CLSA's PE cut from 18x to 13x explicitly factors *"slower AI capex growth and CPO risk"* [5]. In the 2025 interim report, Innolight itself acknowledged *"mature CPO application may bring significant changes to the optical module industry ecosystem"* and showed Nvidia's Quantum-X Photonics 115.2Tb switch reference design [13]. CLSA flagged investment risks include *"long-term penetration of co-packaged optics (CPO)"*; though management in May 2026 argued *"different technology routes are more complementary than substitutive"* [10], this remains the principal multiple compression risk for FY27 and beyond.

### 2. AI Capex Slowdown / Hyperscaler Order Air-Pocket
CLSA explicitly cut 25/26CL net profit by 14%/13% to *"incorporate 1.6T shipment delay and 800G shipment constrain due to continued chip shortage in 100G EML"* and *"AI capex growth slowing down in 26CL"* [2]. The thesis is acutely sensitive to North American CSP capex — any moderation in Google/Meta/AWS/Microsoft AI capex guidance would directly compress order visibility.

### 3. EML Chip Supply Risk — Persistence Beyond 2Q-3Q25
Even into 3Q25 management still flagged optical chips as *"relatively high tightness due to rapid demand growth"* [8]. If EML supply doesn't fully normalize, 800G unit shipments could disappoint vs the **15-20mn unit** 800G global guide for 2025 [3], capping revenue upside.

### 4. Tariff Escalation / Trade-War Re-pricing
While Thailand provides a buffer today, broader trade-war escalation (e.g., expansion of US "entity list" coverage, country-of-origin rule-tightening on optical modules, or retaliatory Chinese policy) could disrupt logistics. Management's 1Q25 response was to *"actively implementing response strategies"* and *"increase domestic market investments"* — a defensive posture [14].

### 5. Pillar Two / Tax Rate Step-Up
Q3 2025 effective tax rate rose to **15.8%** due to OECD Pillar Two accruals on Southeast Asian (Thailand) entities previously enjoying tax holidays, forcing tax rate up to the 15% floor [8]. This is a recurring headwind to net margin going forward unless Pillar Two rules are deferred.

### 6. Price Competition & Annual Price Declines
Management acknowledged *"industry convention is annual price reductions"* with the company's offset being product mix uplift, SiPh penetration and yield improvement [9]. If competitors (Eoptolink, Accelink, Coherent) close the SiPh / 1.6T gap faster than expected, mix-uplift may not fully neutralize ASP declines.

### 7. CPO Adjacency Competition From Fii / Foxconn
1Q26 IR (May 2026) specifically addressed competitor risk: *"Foxconn Industrial Internet (FII) CPO switches have shipped — does this compete with existing products?"* Management positioned different technology routes as **"complementary not substitutive"** [10], but the very framing signals adjacency competition is now real, not theoretical.

### 8. Valuation Compression — Already Off the Highs
CLSA's TP cut from Rmb164.6 to **Rmb102.6** (-37.7%) on PE de-rating from 18x to 13x reflects how quickly multiple compression has occurred [5]. Stock was down -21.8% 1M / -39.3% 3M / -29.2% 12M when CLSA's note was published [2]. Further multiple compression toward 8-10x (if CPO concerns intensify) is the principal de-rating risk.

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## III. Synthesis — Catalyst Calendar (Next 12-18 Months)

| Quarter | Upside Watch | Downside Watch |
|---|---|---|
| **Near-term (next 1-2 quarters)** | 1.6T shipment ramp sequential acceleration; Q4-Q1 800G volume from domestic hyperscalers [3]; Q1-Q2 GM expansion confirming SiPh uplift [9] | EML / optical chip supply re-tightening [8]; tariff carve-out reversal |
| **Mid-term (6-12 months)** | HK listing completion [10]; Thailand capacity fully ramped; 1.6T mix > 30% | Hyperscaler capex commentary in earnings season; CPO commercial adoption announcements from Nvidia |
| **Long-term (12-18 months)** | Scale-up / LPO / NPO commercialization wave from 2027 [12]; 1.6T market reaches ~US$4bn (2026) [11] | Industry adoption of CPO at higher rates than CLSA's 13x PE assumes [5]; sustained pricing pressure |

**Net stance:** The 12-month catalyst profile is **asymmetric to the upside** — 1.6T ramp, SiPh margin uplift, Thailand tariff insulation and HK listing are concrete, calendar-bound, and management-confirmed. The 18-month+ overhang is **CPO substitution risk + AI capex normalization** — these are real but lack a precise trigger date. CLSA's 13x PE captures this trade-off, with TP Rmb102.6 implying ~28% upside from the April 22, 2025 price of Rmb80.07 [3].

---

**Sources**
[1] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — 607956627LinqAlpha.PDF
[2] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — Stock performance & forecast cut
[3] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — Guidance table / EML / 1.6T ramp
[4] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — Thailand capacity
[5] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — Valuation rationale
[6] Zhongji Innolight - Tariff impact manageable — CLSA (23 Apr 2025) — Annual earnings & segment mix
[7] Zhongji Innolight Investor Relations Activity Record — 30 Oct 2025 (3Q25)
[8] Zhongji Innolight Investor Relations Activity Record — 30 Oct 2025 (3Q25) — Pillar Two / chip supply
[9] Zhongji Innolight Investor Relations Activity Record — 16 Apr 2026 (1Q26)
[10] Zhongji Innolight Investor Relations Activity Record — 15 May 2026
[11] Zhongji Innolight 2025 Interim Report — Lightcounting market sizing
[12] Zhongji Innolight Investor Relations Activity Record — 30 Oct 2025 — Scale-up / LPO / XPO / NPO
[13] Zhongji Innolight 2025 Interim Report — CPO industry impact
[14] Zhongji Innolight Investor Relations Activity Record — 30 Apr 2025 (1Q25) — Tariff response & domestic AI

## Citations

- [1] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [2] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [3] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [4] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [5] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [6] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>
- [7] **中际旭创：投资者关系活动记录表20251030** · external
- [8] **中际旭创：投资者关系活动记录表20251030** · external
- [9] **中际旭创：投资者关系活动记录表20260416** · external
- [10] **中际旭创：投资者关系活动记录表20260515** · external
- [11] **中际旭创：2025年半年度报告** · external
- [12] **中际旭创：投资者关系活动记录表20251030** · external
- [13] **中际旭创：2025年半年度报告** · external
- [14] **Zhongji Xuchuang: Investor Relations Activity Record as of April 30, 2025** · external

