Key takeaway

Driven by the surge in demand for the company’s light source products brought by AI and the improvement in its competitiveness, the company’s high? margin data center CW light source products recorded substantial volume growth, driving rapid performance growth. In 1Q26, the company recorded revenue of RMB355mn, up 321% YoY and 63% QoQ; net profit attributable to shareholders of the parent company was RMB179mn, up 1153% YoY and 111% QoQ. As a leading player in the industry, the company has strong competitiveness in products such as CW light sources, while high-end products including 100G EML and 200G EML are progressing smoothly, and the company is deeply bound with core customers at home and abroad, giving it forward-looking positioning advantages in the CPO/OIO field. At the same time, the company is actively expanding capacity and plans to invest RMB1.251bn to build the phase II project, while continuing to advance its H-share listing process to further consolidate its competitive advantages. Against the backdrop of strong demand for optical modules driven by AI, the company is expected to fully benefit.

Event

The company released its 2025 annual report and 1Q26 report. In 2025, the company recorded operating revenue of RMB601mn, up 138.5% YoY; net profit attributable to shareholders of the parent company was RMB191mn, turning from loss to profit YoY. In 1Q26, the company recorded operating revenue of RMB355mn, up 320.94% YoY; net profit attributable to shareholders of the parent company was RMB179mn, up 1153.07% YoY.

Quick Take

1. CW light source volume growth drives strong performance growth. In 2025, the company recorded operating revenue of RMB601mn, up 138.5% YoY; net profit attributable to shareholders of the parent company was RMB191mn, turning from loss to profit YoY; net profit attributable to shareholders ofthe parent company after deducting non-recurring items was RMB167mn, turning from loss to profit YoY. On a quarterly basis, in 4Q25 the company recorded operating revenue of RMB218mn, up 194.87% YoY and 22.37% QoQ; net profit attributable to shareholders of the parent company was RMB85mn, turning from loss to profit YoY and up 42.6% QoQ. The company’s rapid performance growth in 2025 mainly benefited from AI computing power development driving demand for optical chips, while CW light source products in the data center segment were delivered in large volumes, and the continuously optimized product mix together with the release of scale effects drove the company’s performance surge. In 1Q26, the company recorded operating revenue of RMB355mn, up 320.94% YoY and 62.83% QoQ; net profit attributable to shareholders of the parent company was RMB179mn, up 1153.07% YoY and 111.03% QoQ; net profit attributable to shareholders of the parent company after deducting non-recurring items was RMB178mn, up 1173.64% YoY and 152.54% QoQ. In 1Q26, the company sustained rapid earnings growth, and shipments of CW light source and other products continued to ramp up.

2. Product mix continues to improve, expense control shows clear results. In 2025, the company’s gross margin was 58.11%, up 24.79pct YoY; net margin was 31.74%, up 34.18pct YoY. On a single-quarter basis, the company’s gross margin was 63.98% in 4Q25, up 21.93pct YoY and 2.36pct QoQ; net margin was 38.97%, up 46.52pct YoY and 5.53pct QoQ;in 1Q26, the company’s gross margin was 77.81%, up 33.17pct YoY and 13.82pct QoQ; net margin was 50.51%, up 33.54pct YoY and 11.54pct QoQ. The proportion of the company’s high? margin data center products increased, and together with improvements in process and yield, profitability improved significantly. In 2025, the company’s selling expense ratio was 3.95%, down 3.39pct YoY; R&D expense ratio was 13.44%, down 8.18pct YoY; administrative expense ratio was 7.47%, down 2.85pct YoY; financial expense ratio was -1.43%, up 5.5pct YoY; the total period expense ratio was 23.43%, down 8.92pct YoY. In 1Q26, the company’s selling expense ratio was 3.58%, down 2.56pct YoY; R&D expense ratio was 5.81%, down 7.94pct YoY; administrative expense ratio was 5.23%, down 2.36pct YoY; financial expense ratio was -0.21%, up 2.99pct YoY; the total period expense ratio was 14.42%, down 9.87pct YoY. As scale expands, the company’s overall expense ratio declines significantly, while fluctuations in financial expenses are mainly affected by reduced interest income and foreign exchange losses.

3. Silicon photonics penetration accelerates, active capacity expansion and H-share listing consolidate competitive advantages. The development of AI computing power drives the upgrade of high-speed optical modules, accelerating the penetration of silicon photonics solutions and sustaining strong growth in demand for CW light sources. As a leading player in the industry, the company has strong competitiveness in CW light source and other products. CW 70mW and 100mW laser products have achieved mass delivery. The company has also established deep cooperation with leading domestic and overseas manufacturers. It holds a strategic position in next-generation optical interconnect technologies such as CPO and OIO, and will fully benefit from the strong industry cycle. The company continues to step up capacity expansion. In February 2026, it announced a planned investment of RMB1.251bn to build phase II of the optoelectronic communication chip R&D and production base project. This will significantly increase high-end optical chip production capacity and delivery capability, and improve response speed to demand from domestic and overseas customers. Meanwhile, the company recently submitted an application to the Hong Kong Stock Exchange for the issuance and listing of H shares and published the application materials, further advancing its overseas H-share listing and strengthening its capital base and global client penetration capability. The company’s market competitive advantages continue to consolidate, and its future performance is expected to reach a new level.

4. Earnings forecast We expect the company’s revenue in 2026–2028 to reach RMB1.539bn, RMB2.486bn, and RMB3.633bn, respectively. Net profit attributable to shareholders of the parent company is projected at RMB690mn, RMB1.217bn, and RMB1.915bn, respectively. Based on the current market capitalization, the corresponding PE ratios are 192x, 109x, and 69x. We maintain a “Buy” rating.

5. Risks: Downstream markets such as fiber access and data centers are the company’s main sources of revenue. Changes in downstream demand may affect the company’s performance. There is uncertainty in sales revenue from 4G/5G mobile communication networks. Declining product prices may lead to gross margin fluctuations and sustainability risks. Some downstream manufacturers have potential competitive relationships with the company. R&D investment is lower than comparable companies in the same industry, creating the risk that technological upgrades and iterations fall short of expectations. If the product development and market expansion of new laser chip products such as 10G 1577nm EML, 100G PAM4 EML, and high-power CW lasers progress slowly, performance may fall below market expectations. The development of new markets such as LiDAR and sensors may also fall short of expectations. Lower-than-expected silicon photonics penetration may affect demand for the company’s CW lasers.