---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 192893
conversation_id: d5464465-62ef-4a78-961d-961b41098cfb
citations: 14
created: 2026-05-31 21:53:49Z
---

# How does Zhongji Innolight’s valuation compare to peers, and what justifies its premium/discount?

## Zhongji Innolight (300308 CH) — Valuation vs Peers

### Where it trades today

Per CLSA's 23-Apr-2025 update, Zhongji Innolight (300308 CH) was priced at **Rmb80.07** with a market cap of **US$12.3bn** [14][6]. On CLSA's numbers the stock screens as follows on house forecasts:

| Multiple | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---|---|---|---|---|
| **PE (x)** | 29.0 | 17.3 | **11.7** | **10.1** | 9.6 |
| **EV/EBITDA (x)** | 22.2 | 13.1 | 8.9 | 7.4 | 6.5 |
| **P/B (x)** | 4.5 | 4.7 | 3.5 | 2.7 | 2.2 |
| **Dividend yield (%)** | 0.6 | 1.0 | 1.7 | 2.0 | 2.1 |
| **ROE (%)** | 16.6 | 31.0 | 33.6 | 29.6 | 25.0 |

[4] Note the ROE is exceptional — running above 30% in 2024–25CL on top of a 122% revenue surge in 2024 and ~40% projected in 2025 — yet the 25CL PE has compressed to just **11.7x**, well below the 28x five-year average [3][8].

### CLSA's target valuation: a discount to history, not a premium

CLSA values the stock at **13x 26CL EPS**, cut from 18x previously, yielding a TP of **Rmb102.6** (down from Rmb164.6) [1][2]. The applied multiple sits **materially below Innolight's own 5-year average forward PE of 28x** [3][8]. CLSA explicitly justifies the discount to its own historical band on two factors:

1. **Slowing AI capex growth in 2026** — the implicit demand top after the 2024 hyperscaler buildout [1].
2. **Co-packaged optics (CPO) risk** — a long-run displacement threat to pluggable transceivers, the core Innolight product [3][1].

A third factor that is implicit in the lower trough multiple: the 1Q25 results were affected by **100G EML chip shortages** and **1.6T shipment delays** tied to GB200/300 rack issues at key AI clients — execution risk on the next product cycle [5][7].

### Versus listed optical transceiver / AI hardware peers

CLSA's 9-Feb-2025 sector note is the cleanest peer benchmarking exercise. Where Innolight sits relative to the optical/AI cohort:

| Company | Ticker | Methodology | New target PE | Old | Comment |
|---|---|---|---|---|---|
| **Zhongji Innolight** | 300308 CH | 26CL PE | **18x → 13x** (Apr) | 23x | Below 5-yr avg of 28x [3][8] |
| **TFC Optical** | 300394 CH | 25/26CL avg PE | **24x** | 31x | "Below optical component/transceiver and AI hardware peers' average of **38x**" [9][10] |
| **Foxconn Industrial (FII)** | 601138 CH | 26CL PE | **16x** | 20x | At +1 std vs history [11] |
| Q Technology | 1478 HK | 26CL PE | 20x | 18x | ~+1 std vs history |
| BYDE | 285 HK | 26CL PE | 19x | 15x | Roll-forward + auto/robotics lift |

[13] Two anchors fall out of this:

- **Innolight trades at a meaningful discount to direct optical peer TFC Optical (24x) and to the broader "optical component/transceiver and AI hardware peers' average of ~38x"** CLSA references when valuing TFC [9]. TFC explicitly supplies optical components to Innolight, Coherent (Finisar) and Eoptolink [12], so the read-across is direct — yet Innolight's spot 11.7x 25CL PE sits at roughly 30% of that peer-cohort multiple.
- **vs A-share AI hardware peer FII (16x 26CL PE)**, Innolight's CLSA target multiple of 13x is slightly lower despite Innolight's stronger growth (45% NP growth 25CL, ROE 33.6%) and cleaner balance sheet (net cash, net debt/equity -18%) [4]. CLSA's logic: FII gets +1 std of its history because earnings are accelerating; Innolight gets a discount to its own history because the next product cycle (1.6T, CPO) carries technology-displacement risk that peer FII doesn't directly face [11][1].

### Why the "discount-to-history, in-line-to-low-vs-peers" stance is the right read

Putting the pieces together, Innolight's valuation profile breaks down into three signals:

1. **vs its own history (28x 5-yr avg) → trades at sharp discount** (11.7x spot 25CL PE = ~42% of historical PE) [3][8]. Justified by (a) decelerating hyperscale capex into 2026, (b) the structural CPO overhang that — if successful — disintermediates pluggable transceiver makers like Innolight, and (c) near-term execution wobbles around 1.6T ramp [1][3].

2. **vs A-share optical/AI hardware peer cohort (~38x CLSA reference average) → discount** [9]. The discount reflects the same CPO/AI capex risks but is partially mitigated by Innolight's superior near-term economics — 33.6% ROE (2025CL), 22.5% net margin, net cash, and ~50% net profit growth in 2025 [4].

3. **vs direct peer TFC Optical (24x target PE) → still a discount** despite Innolight being a larger, more diversified transceiver leader [13]. This is the most pointed evidence that the market and the sell-side are pricing technology-cycle risk (CPO, 1.6T execution) into Innolight more than into the upstream component play.

### Bottom line — what the data justifies

Innolight is **NOT trading at a premium** to peers on CLSA's framework — it's trading at a **discount both to its own historical band (~58% below 28x 5-yr avg) and to the broader optical/AI hardware cohort (~38x peer average)** [3][9]. The discount is rational and is justified by three asymmetric risks specific to the high-speed transceiver value chain:

- **AI training capex deceleration in 2026** (impacts data-center transceiver volume cadence) [1].
- **CPO long-run displacement** (technology obsolescence overhang specific to pluggable module makers) [3][8].
- **Near-term 1.6T execution** (continued EML supply shortages and GB200/300 rack delays slowing the high-margin product mix shift) [5][7].

Counterweighting these — and the reason CLSA stays at **Outperform with +28% potential return** to Rmb102.6 [6] — Innolight retains best-in-class ROE (33.6%), 45% net profit growth in 2025, net cash, and Thailand capacity that neutralises US tariffs [5][14]. If 1.6T ramp executes and CPO timing slips further, the multiple has scope to re-rate back toward the historical 18–28x band rather than the current 11–13x trough.

---

**Sources**
[1] Zhongji Innolight – O-PF (Tariff impact manageable) — CLSA (23-Apr-2025) — 607956627LinqAlpha.PDF
[2] Same as [1] — Figure 4 Valuation change table
[3] Same as [1] — Valuation details ("five-year average PE of 28x")
[4] Same as [1] — Financials at a glance table (PE/EV/EBITDA/ROE)
[5] Same as [1] — Title page commentary (1Q25 results, Thailand capacity)
[6] Same as [1] — 12M price target / market cap details
[7] China Technology (Acceleration in AI application) — CLSA (9-Feb-2025) — 607949941LinqAlpha.PDF (Zhongji thesis, "currently trading at 13x 25CL PE")
[8] Same as [7] — Valuation details, Zhongji Innolight (18x vs 5-yr avg 28x)
[9] Same as [7] — TFC valuation details ("peers' average of 38x")
[10] Same as [7] — TFC Optical valuation logic
[11] Same as [7] — FII valuation details (16x 26CL PE)
[12] Same as [7] — TFC investment thesis (supply linkages to Innolight, Coherent, Eoptolink)
[13] Same as [7] — Forecast and target price change summary table
[14] Same as [1] — Companies mentioned (price reference Rmb80.07)

## 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] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [8] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [9] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [10] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [11] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [12] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [13] **607949941LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949941LinqAlpha.PDF>
- [14] **607956627LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956627LinqAlpha.PDF>

