---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 278335
conversation_id: 3384ea0e-b09d-4e7e-a3b9-cadbb5d1706f
citations: 2
created: 2026-05-31 18:29:12Z
---

# Provide a one‑year narrative of Zhongji Innolight, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Zhongji Innolight (300308 CH) — One-Year Investor Narrative

**Scope note:** Internal CLSA research coverage on Zhongji Innolight ("Innolight") was synced from Nov-2024 through 30-Jun-2025; the trajectory below tracks that window. The story is a near-textbook AI optical-transceiver boom → DeepSeek/CPO derating → tariff scare → operational re-affirmation arc.

---

## 1. Setup — Late 2024: The "must-own" AI capex play (Nov 2024)

Heading into 2025, CLSA's house view treated Innolight as one of the cleanest leveraged plays on hyperscale AI capex. The Global Themes 2025 outlook explicitly named Innolight (alongside TFC Optical) as the key Chinese supplier "for top 10 hyperscaler capex" growth of **38%/21% in 24/25CL to US$250/304bn, of which the AI portion could exceed 60%**, with **Nvidia GB200 racks starting to ship end-2024 and ramp in 2025, bringing 1.6T optical transceivers' ramp-up in 25CL** [1, 18].

The set-up was: rising customer concentration with NA hyperscalers, mix shift to 800G/400G higher-margin SKUs, and a clean catalyst path (GB200 in 4Q24 → GB300 in 2H25 → 1.6T ramp).

## 2. Peak optimism — Jan 2025: TP Rmb203, "Outperform"

By the first CLSA daily of the year (8-Jan-2025), Tony Zhang reiterated **Outperform with TP Rmb203 (+62% upside)**, citing "intact strong growth in 2025 with solid AI capex to continue" and Nvidia GB300 ramp from 2H25. Critically, CLSA flagged that "market concerns on co-packaged optics (CPO) and tariffs are largely priced-in" and called the valuation "attractive" [1].

A 21-Jan-2025 China Tech sector piece priced Innolight at **Rmb119.16 with market cap US$18.2bn against the same Rmb203 TP (+70% upside)** [2], framing it as a primary beneficiary of ByteDance's AI training/inference capex (alongside GoerTek and Lenovo). The recommendation history table shows the conviction arc: BUY at Rmb97.5 (Nov-2023) → BUY at Rmb107.14 (Jan-2024) → BUY at Rmb149.29 (Apr-2024) → BUY at Rmb185 (Jun-2024) → **O-PF at Rmb203 (23-Oct-2024)** — i.e., TP doubled over twelve months on AI conviction [3].

## 3. The DeepSeek shock — Feb 2025: The first leg down

The 9-Feb-2025 China technology note ("Acceleration in AI application") was the first material crack. Triggered by the **rise of the DeepSeek model**, CLSA warned that "smaller model sizes and dropping inference costs" could compress training capex [17]. For Innolight specifically:

- **2024 preliminary net profit Rmb4.6–5.8bn (mid Rmb5.2bn) slightly missed consensus**, blamed on "continued supply shortage of 100G EML" optical chips [4].
- 1.6T shipment had "commenced shipment in 4Q24" but volume ramp-up was now pushed to 2Q25, "dragged by unsmooth GB200/300 rack shipment with technical issue" [4].
- CLSA cut 24/25/26CL earnings forecasts by 3.8%/9.3%/6.6% to **Rmb5.2bn / 8.7bn / 9.9bn**, lowered the applied PE multiple from **23x → 18x** "to factor in possible slower model training demand," and lowered TP from **Rmb203 → Rmb164.6** on 26CL PE [4, 5].
- At the time, the stock was already trading at **13x 25CL PE** — i.e., the market had already priced in much of the derating [4].

The CPO theme was treated as a longer-tail risk: TFC Optical (peer) had its PE cut even harder (31x → 24x) explicitly to factor in "slower 1.6T/800G penetration impacted by DeepSeek" [5, 8].

## 4. Tariff scare — Apr 2025: The second leg down + sharp recovery

The April news flow whipsawed the name through two sharp moves.

**(a) Reciprocal tariffs (Apr 6)** — Trump's 2-Apr reciprocal tariffs pressured supply chains; Innolight was now trading at **Rmb93.88** (still O-PF) [7]. Importantly, CLSA highlighted Innolight's pre-emptive supply-chain hedge: **"Optical transceiver company Zhongji Innolight has established the capability to fulfil US market demand from Thailand plant"** [6].

**(b) Electronics exemption (Apr 13)** — Within a week, the US Administration's product exemption list specifically **included "smartphones, PCs, tablets, servers, optical transceivers"**, removing the worst-case tariff scenario for Innolight. Yet the stock had fallen further to **Rmb78.37** [8].

**(c) 1Q25 results (Apr 23)** — The standalone Outperform note ("Tariff impact manageable") confirmed the operational story was intact despite the macro overhang:

| 1Q25 metric | Value | Source |
|---|---|---|
| Net profit | **Rmb1.6bn, +57% YoY, +12% QoQ** | [10, 15] |
| Drag | Optical chip supply shortage + 1.6T shipment delay w/ AI clients' product delay | [10, 15] |
| 800G shipment guidance | **15–20mn units globally in 2025** (unchanged) | [9] |
| 1.6T ramp | From 2Q25; broader hyperscaler Ethernet adoption from 2026 | [9] |
| Domestic 400G/800G demand | Strong from Chinese hyperscalers; 800G from 4Q25 | [9] |
| Thailand capacity | Ramping; no tariff on Thailand → US exports | [16] |

Despite the operational re-affirmation, CLSA still cut 25/26CL net profit by **14%/13% to Rmb7.5bn / Rmb8.6bn**, lowered the PE multiple from **18x → 13x** ("AI capex growth slowing down in 26CL and increasing adoption of CPO in the long run") and reduced TP from **Rmb164.6 → Rmb102.6** [11]. The stock was at **Rmb80.07 (12M-price target Rmb102.6, US$12.3bn market cap, +28% upside) but had returned −21.8% / −39.3% / −29.2% over 1M / 3M / 12M** — clearly underperforming the broader market [10, 11]. The recommendation was maintained at **Outperform** [15].

## 5. Stabilization & re-rating — Mar 2025 sustainability table

A useful mid-cycle valuation snapshot came in the 13-Mar-2025 China ESG demograpocalypse table: Innolight at **Rmb102.36, market cap US$17.8bn**, trading at **11.5x 25CL PE / 10.4x 26CL PE, PB 4.1x, ROE 35.3%, with consensus next-3-year OP growth of 76.5%** [13, 14]. By any traditional yardstick this was a high-quality compounder valuation — the share-price weakness was almost entirely multiple compression, not earnings impairment.

## 6. The 2024 print confirmed the operational thesis

Innolight's own 2024 annual report (published April 2025) was a vindication of the underlying growth story even as the multiple was being compressed:

| FY2024 (vs FY2023) | Value | YoY |
|---|---|---|
| Revenue | **Rmb 23.86bn** vs Rmb 10.72bn | **+122.6%** [19] |
| Net profit to parent | **Rmb 5.17bn** vs Rmb 2.17bn | **+137.9%** [19] |
| ROE (weighted avg) | **31.23%** vs 16.58% | +14.65 pp [19] |
| EPS (basic) | **Rmb 4.72** vs Rmb 2.00 | +136.0% [19] |

The quarterly progression showed clean sequential acceleration — Q1 Rev Rmb 4.84bn / NP Rmb 1.01bn → Q2 Rev Rmb 5.96bn / NP Rmb 1.35bn → Q3 Rev Rmb 6.51bn / NP Rmb 1.39bn → **Q4 Rev Rmb 6.55bn / NP Rmb 1.42bn** [20]. There was no operational slowdown; the multiple compression was sentiment-driven (DeepSeek-led model-training capex doubts + tariff overhang + long-tail CPO disintermediation risk).

## 7. Half-time review — Jun 2025: Sentiment turning back

By 30-Jun-2025, CLSA's half-time review explicitly characterized the H1-2025 sell-off as a temporary "**datacentre demand wobble earlier in the year**" already largely in the rear-view: "Hyperscaler capex forecasts have been lifted by 8-10% — principally at Oracle and Meta, which added US$25bn in planned capex for 2026, now sitting at US$360bn. Hyperscaler commentary also pointed to robust cloud and AI inference demand" [12]. The piece called the AI-overhype concern (DeepSeek + Microsoft lease pullback rumors) as having been **"mostly put to bed since the May quarterlies"** and noted AI datacentres now spreading outside the US (Stargate UAE, SK–Amazon Korea) — a directly bullish read-across for high-end optical transceiver volumes into 2026.

---

## Putting it together — Why sentiment & valuation moved the way they did

| Phase | Catalyst | Sentiment | Valuation / TP |
|---|---|---|---|
| Nov-2024 | Hyperscaler capex inflection; GB200/GB300 roadmap | **Euphoric** — flagship AI play | TP Rmb203 (23-Oct-2024 entry), 23x 25CL PE [3] |
| Jan-2025 | New-year reaffirmation; CPO/tariff "priced-in" | Bullish, "attractive valuation" | Price Rmb119.16, TP Rmb203, +70% upside [2] |
| Feb-2025 | **DeepSeek**; 1.6T delay; GB200/300 rack issues | First derating; CPO risk in focus | TP **Rmb203 → Rmb164.6**, PE **23x → 18x** [4, 5] |
| Mar-2025 | Stabilization; strong ROE | Rebuilding | Rmb102.36, 11.5x 25CL PE [13, 14] |
| Apr-2025 | **Reciprocal tariffs → exemption → 1Q25 print** | Volatile but operationally vindicated | TP **Rmb164.6 → Rmb102.6**, PE **18x → 13x** [11] |
| Jun-2025 | Hyperscaler capex re-acceleration; global AIDC spread | Sentiment turning back | "Wobble" framed as transient; +US$25bn 2026 capex added at Oracle/Meta [12] |

**The bottom-line driver of the share-price drawdown was multiple compression, not earnings.** Earnings forecasts were cut ~10-14%, but the applied PE was cut from 23x → 13x — i.e., **roughly 70% of the de-rating was sentiment (DeepSeek / CPO / tariff macro)**, not company-level execution. The 2024 print (+122% revenue, +138% NP, 31% ROE) and the operationally tight 1Q25 (NP +57% YoY) both demonstrated the underlying franchise was intact; the company also pre-emptively de-risked tariff exposure via Thailand capacity. By the June 2025 half-time review, CLSA was already framing the H1 weakness as a "datacentre demand wobble" being put to bed — setting up a potential sentiment-and-multiple rebuild into 2H25 / 2026 as 1.6T volume ramps and GB300 ships.

---

**Sources**
[1] All Things China — CLSA ATC Daily (Zhongji Innolight | Tencent | Jiangsu Hengli) — CLSA, 8 Jan 2025 — 607947723LinqAlpha.PDF
[2, 3] China Technology (Solid progress) — CLSA, 21 Jan 2025 — 607948572LinqAlpha.PDF
[4, 5, 17, 18] China technology (Acceleration in AI application) — CLSA, 9 Feb 2025 — 607949941LinqAlpha.PDF
[6, 7] China technology (Shared burden) — CLSA, 6 Apr 2025 — 607955106LinqAlpha.PDF
[8] China Technology (iPhone exempt from tariff) — CLSA, 13 Apr 2025 — 607955785LinqAlpha.PDF
[9, 10, 11, 15] Zhongji Innolight — O-PF (Tariff impact manageable) — CLSA (Chris Liu / Tony Zhang), 23 Apr 2025 — 607956627LinqAlpha.PDF
[16] All Things China — CLSA ATC Daily (New Oriental Edu | Zhongji Innolight | Akeso | Asymchem) — CLSA, 24 Apr 2025 — 607956734LinqAlpha.PDF
[12] Global Themes 2025 (Half-time review) — CLSA, 29 Jun 2025 — 607960638LinqAlpha.PDF
[13, 14] China ESG (Sustainable policies) — CLSA, 13 Mar 2025 — 607952987LinqAlpha.PDF
[18] Global Themes 2025 (What to watch for) — CLSA, 24 Nov 2024 — 607942979LinqAlpha.PDF
[19, 20] Zhongji Innolight Co., Ltd. (300308-CN) — 2024 Annual Report (Chinese), published Apr 2025

## Citations

- [19] **Zhongji Innolight Co., Ltd. (300308-CN) - Annual Report for period end 31-Dec-2024 (Chinese) - PDF** · external
- [20] **Zhongji Innolight Co., Ltd. (300308-CN) - Annual Report for period end 31-Dec-2024 (Chinese) - PDF** · external

