Zhongji Xuchuang: The world's leading manufacturer of high-end optical modules. The company integrates R&D, design, packaging, testing and sales of high-end optical communication transceiver modules to provide overall solutions for the cloud data center and telecommunications equipment market. With its advantages such as industry-leading technology research and development capabilities, low-cost product manufacturing capabilities, and comprehensive delivery capabilities, the company has won wide recognition from customers at home and abroad, and has maintained continuous growth in market share.
The company's performance increased dramatically in the first quarter of 2024, achieving revenue of 4.843 billion yuan, an increase of 163.59% over the previous year; net profit to mother was 1,009 billion yuan, an increase of 303.84% over the previous year.
Generative artificial intelligence is booming, driving the demand for optical connectivity in AI data centers. OPEN AI's ChatGPT has sparked a global investment boom in generative AI. Large cloud computing companies represented by Microsoft and Google continue to invest heavily in the construction of AI data centers, and demand for GPUs for training and inference and their internet networks is growing rapidly. 800G and 1.6T optical modules directly benefit from the core components of AI data center optical interconnection. In 2023Q4, the total capital expenditure of overseas cloud giants (Microsoft, Amazon, Apple, Meta, Google) increased 4.81% year over year to US$44.164 billion; according to Factset's unanimous expectations, the total capital expenditure in 2024 will increase 27.2% year over year to US$193.83 billion. According to Lightcounting's forecast, the global market size of optical modules may continue to grow at a CAGR of 11% from 2022 to 2027, and is expected to surpass $20 billion in 2027.
The company's 800G and 1.6T high-speed optical modules have obvious first-mover advantages, and forward-looking layout of new technologies such as silicon light and CPO.
In terms of 800G, the company has a comprehensive 800G OSFP optical module product portfolio, including 4x100Gx2 and 8x100G architecture solutions. In addition to traditional EML designs, it has also adopted silicon light-based solutions to meet short-distance transmission requirements. At the same time, the company has 1.6T OSFP series optical modules and is the first in the industry to launch 1.6T-DR8 OSFP 224 LPO products; this series of products mainly uses 8x200G solutions, including EML and silicon light designs.
In addition to silicon optics, the company is also the first in the industry to use chip on board (COB) optoelectronic device design and packaging technology, and in 2024, jointly launched an 800GZR/ZR+ optical module for data center interconnection, using Marvell Orion coherent DSP, to maintain its leadership in the field of optical module technology.
Profit forecast, valuation and rating: Zhongji Innotech is the world's leading high-end optical module company, fully benefiting from the current AI development trend. The company's 800G/1.6T product revenue is growing rapidly. We raised the company's net profit to mother of 5.229 billion yuan (up 37.3%) and 7.313 billion yuan (up 54.7%) in 2024 and 2025, and added a new 2026 performance forecast. We forecast that the company's revenue for 2024-2026 will be 254.19/341.18/42,508 billion yuan, and net profit to mother will be 52.29/73.13/9.211 billion yuan, respectively. The PE corresponding to the current market value is 26x/18x/15x, respectively, maintaining a “buy” rating.
Risk warning: AI technology development falls short of expectations; cloud computing capital expenditure falls short of expectations; company market share is declining.