Innolight (300308 CH)

1Q26 earnings: Brighter than a shooting star

Innolight delivered a standout 1Q26, with revenue jumping 192% YoY / 47.3% QoQ to RMB19.5bn (vs. Bloomberg consensus of RMB15.4bn), and net profit surging 262% YoY / 56.5% QoQ to RMB5.7bn (vs. RMB4.4bn consensus), both marking new quarterly highs. During the period, GPM expanded further to 46.1% (vs. 44.5% in 4Q25), primarily due to improving mix and rising SiPho penetration. Mgmt. framed the strong quarter not as a one-off outperformance but as a reflection of sustained demand strength and improved execution, with robust capacity ramp-up, including Thailand, and resilient raw material procurement supporting shipment in a tight S/D backdrop. Maintain BUY with TP adjusted to RMB1,080 on 28x rollover 2027E P/E (prev. 28x 2026E P/E).

800G and 1.6T ramped up in tandem, with rising SiPho mix further lifting margin. Revenue strength was driven by concurrent ramp-up in both 800G and 1.6T products, indicating that growth is broadening across the company's high-end optical portfolio rather than being tied to a single product inflection. Mgmt. highlighted meaningful contribution from both 800G and 1.6T shipments in 1Q26, with the richer product mix continuing to drive margin higher. Within 1.6T, SiPho is expected to account for more than half of shipments this year, reinforcing our view that rising SiPho penetration should remain an important structural support to margin.

NPO is the earlier catalyst, while XPO provides broader deployment flexibility. Mgmt. indicated NPO has already received explicit customer demand indications and could enter volume production in 2027, with the use case tied primarily to scale-up architectures. XPO, by contrast, is still in active customer promotion, but was positioned across both scale-up and scale-out scenarios, with transmission reach of roughly 100m to 2km, implying broader deployment potential once commercialization visibility improves.

Maintain BUY with TP revised to RMB1,080 on rollover 28x 2027E P/E, supported by an order backlog that now stretches through 2026 and into 2027 (and even beyond). In our view, what stood out this quarter was not only the magnitude of the beat, but the quality of execution behind it: Capacity expansion landed on time, supply-chain preparation remained effective despite tight upstream conditions, while product mix was moving structurally upward. We believe this supports a more durable earnings profile and strengthens confidence that Innolight can capture incremental upside from future architectural shifts.

Earnings Summary

(YE 31 Dec)

FY24A

FY25A

FY26E

FY27E

FY28E

Revenue (RMB mn)

23,862

38,240

84,065

121,495

175,287

YoY growth(%)

122.6

60.3

119.8

44.5

44.3

Gross margin(%)

33.8

42.0

45.6

46.6

48.5

Net profit (RMB mn)

5,171.5

10,797.3

28,040.8

42,888.3

66,064.9

YoY growth(%)

137.9

108.8

159.7

52.9

54.0

EPS(Reported)(RMB)

4.72

9.80

25.24

38.60

59.46

P/E(x)

171.5

82.6

32.1

21.0

13.6

Source: Company data, Bloomberg, CMBIGM estimates

BUY (Maintain)

Target Price RMB1080.00

(Previous TP RMB707.00)

Up/Downside 33.4%

Current Price RMB809.61

China Semiconductors

(852)37618727

kevinzhang@cmbi.com.hk

Aaron GUO

(852)39163715

aaronguo@cmbi.com.hk

Stock Data

Mkt Cap (RMB mn)

899,557.7

Avg 3 mths t/o (RMB mn)

18,372.9

52w High/Low (RMB)

809.61/77.61

Total Issued Shares (mn)

1111.1

Source: FactSet

Shareholding Structure

Shandong Zhongji Investment Holdings Co.

10.9%

Wang Weixiu

6.3%

Source: Bloomberg

Share Performance

Absolute

Relative

1-mth

44.1%

42.7%

3-mth

31.2%

29.6%

6-mth

120.6%

98.9%

Source: FactSet

12-mth Price Performance


Source: FactSet


Financial Summary

INCOME STATEMENT

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Revenue

10,718

23,862

38,240

84,065

121,495

175,287

Cost of goods sold

(7,182)

(15,796)

(22,166)

(45,764)

(64,904)

(90,216)

Gross profit

3,536

8,067

16,074

38,301

56,591

85,071

Operating expenses

(1,042)

(2,017)

(2,477)

(4,966)

(5,875)

(6,946)

Selling expense

(51)

(47)

(78)

(171)

(182)

(263)

SG&A expense

(558)

(879)

(987)

(2,088)

(3,025)

(4,364)

R&D expense

(739)

(1,244)

(1,615)

(3,425)

(4,707)

(6,440)

Others

306

153

202

717

2,039

4,121

Operating profit

2,494

6,050

13,597

33,334

50,717

78,125

Other income

2

5

10

22

31

45

Other expense

(4)

(2)

(7)

(16)

(23)

(33)

Pre-tax profit

2,492

6,052

13,600

33,340

50,725

78,137

Income tax

(285)

(681)

(2,020)

(3,667)

(5,580)

(8,595)

After tax profit

2,208

5,372

11,580

29,673

45,146

69,542

Minority interest

34

200

782

1,632

2,257

3,477

Net profit

2,174

5,171

10,797

28,041

42,888

66,065

BALANCE SHEET

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Current assets

11,319

18,196

31,084

57,579

104,507

165,819

Cash & equivalents

3,317

5,054

10,987

23,545

65,480

112,701

Account receivables

2,581

4,604

6,277

14,912

15,046

21,452

Inventories

4,295

7,051

12,681

17,411

21,710

27,724

Prepayment

59

80

134

236

341

491

Other current assets

1,067

1,407

1,005

1,475

1,931

3,451

Non-current assets

8,687

10,671

14,205

18,574

25,778

35,557

PP&E

3,948

5,820

7,081

11,257

14,553

19,829

Right-of-use assets

27

34

105

853

1,773

2,975

Deferred income tax

82

222

541

541

909

1,555

Intangibles

401

378

378

254

250

352

Goodwill

1,939

1,939

1,939

1,939

1,939

1,939

Other non-current assets

2,291

2,279

4,163

3,731

6,354

8,908

Total assets

20,007

28,866

45,289

76,153

130,285

201,377

Current liabilities

4,360

6,497

11,558

14,435

25,812

31,538

Short-term borrowings

62

1,426

301

913

1,491

1,807

Account payables

1,857

2,991

7,330

7,716

15,401

16,731

Tax payable

213

244

1,250

2,102

3,596

5,558

Other current liabilities

2,039

1,545

2,287

3,052

4,220

5,741

Contract liabilities

3

10

26

40

58

83

Accrued expenses

187

282

364

612

1,047

1,618

Non-current liabilities

872

2,076

2,109

3,199

5,111

7,621

Long-term borrowings

319

606

510

510

510

510

Bond payables

0

0

0

0

0

0

Deferred income

216

270

291

490

838

1,295

Other non-current liabilities

337

1,200

1,308

2,200

3,763

5,816

Total liabilities

5,232

8,573

13,668

17,634

30,922

39,160

Share capital

803

1,121

1,111

1,111

1,111

1,111

Retained earnings

5,870

10,624

20,248

45,065

82,962

141,280

Other reserves

7,589

7,388

8,406

8,856

9,544

10,604

Total shareholders equity

14,261

19,134

29,765

55,032

93,617

152,995

Minority interest

513

1,159

1,856

3,488

5,745

9,222

Total equity and liabilities

20,007

28,866

45,289

76,153

130,285

201,377


CASH FLOW

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Operating

Profit before taxation

2,492

6,052

13,600

33,340

50,725

78,137

Depreciation & amortization

525

713

934

1,152

1,468

1,936

Tax paid

(285)

(681)

(2,020)

(3,667)

(5,580)

(8,595)

Change in working capital

(830)

(3,210)

(1,958)

(12,341)

4,520

(10,261)

Others

(6)

290

340

1,137

1,822

1,981

Net cash from operations

1,897

3,165

10,896

19,621

52,955

63,198

Investing

Capital expenditure

(1,704)

(2,866)

(2,760)

(4,899)

(7,079)

(10,213)

Acquisition of subsidiaries/ investments

(3,971)

(2,725)

0

0

0

0

Net proceeds from disposal of short-term investments

4,435

2,619

0

0

0

0

Others

65

37

121

1,201

1,596

2,221

Net cash from investing

(1,176)

(2,935)

(2,639)

(3,698)

(5,484)

(7,992)

Financing

Dividend paid

(207)

(399)

(1,083)

(2,918)

(4,456)

(6,849)

Net borrowings

(884)

1,685

(1,114)

612

578

316

Proceeds from share issues

(109)

246

205

0

0

0

Others

884

(40)

(152)

(1,317)

(1,317)

(1,317)

Net cash from financing

(316)

1,492

(2,144)

(3,623)

(5,196)

(7,850)

Net change in cash

Cash at the beginning of the year

2,809

3,234

4,988

10,944

23,502

65,437

Exchange difference

20

39

(178)

0

0

0

Others

405

1,715

6,134

12,559

41,935

47,221

Cash at the end of the year

3,234

4,988

10,944

23,502

65,437

112,658

GROWTH

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Revenue

11.2%

122.6%

60.3%

119.8%

44.5%

44.3%

Gross profit

25.1%

128.1%

99.3%

138.3%

47.8%

50.3%

Operating profit

87.9%

142.6%

124.7%

145.2%

52.1%

54.0%

Net profit

77.6%

137.9%

108.8%

159.7%

52.9%

54.0%

PROFITABILITY

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Gross profit margin

33.0%

33.8%

42.0%

45.6%

46.6%

48.5%

Operating margin

23.3%

25.4%

35.6%

39.7%

41.7%

44.6%

Return on equity (ROE)

16.6%

31.0%

44.2%

66.1%

57.7%

53.6%

GEARING/LIQUIDITY/ACTIVITIES

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Current ratio (x)

2.6

2.8

2.7

4.0

4.0

5.3

VALUATION

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

P/E

404.8

171.5

82.6

32.1

21.0

13.6

P/E (diluted)

410.7

174.9

83.4

32.1

21.0

13.6

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.



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