Nomura: Yuanjie's third-quarter revenue rises 20% quarter on quarter; Nomura raises earnings forecasts but cuts target price

How strong was third-quarter growth?

Yuanjie's revenue in the third quarter of 2026 was 684 million yuan, up 283.5% year on year and 20% quarter on quarter; net profit attributable to the parent was 417 million yuan, up 599% year on year but down 2.5% quarter on quarter.
Nomura attributed revenue growth to strong demand for datacom optical chips and the company's rising share among optical module customers. Quarterly gross margin reached 83.4%, up 21.8 percentage points year on year and 1.4 percentage points quarter on quarter; the bank attributed the improvement to a better product mix, yields and capacity utilization.

Nomura said the company is expanding capacity for datacom CW continuous-wave lasers and EML chips to meet demand for 800G and 1.6T silicon photonics modules. The bank expects CW laser revenue to grow at a compound annual rate of 78% from 2026 to 2028, driven mainly by 70mW and 100mW products, and to account for about 80% of total company revenue by 2028.
Management is confident in the technical progress of 100G EML chips, but the company's main production capacity remains allocated to CW lasers. Nomura also believes the company has made progress in high-power lasers above 120mW and could become one of the early movers in the near-packaged optics market in 2027.

Based on CW and EML demand and capacity expansion, Nomura raised its revenue forecasts for 2026–2028 by 0.1% to 45.8%; a higher share of high-margin, high-power CW lasers, together with the capacity ramp-up, led the bank to raise its gross margin forecasts for the same period by 6.8 to 14.1 percentage points and its earnings forecasts by 26.3% to 102.5%.
Among these revisions, the 2026 forecast for net profit attributable to the parent was raised from 692 million yuan to 1.402 billion yuan. Nomura is more optimistic about selling prices and shipment growth amid a continued shortage of optical chips; its revenue forecasts for 2026–2028 are 14% to 59% above Wind consensus, while its net profit forecasts are 43% to 87% higher.
Despite the forecast upgrades, annual gross margin in Nomura's model still falls from 80.3% in 2026 to 74.6% in 2028, while capital expenditure rises from 860 million yuan to 2.321 billion yuan over the same period.

Nomura cut its target price from 1655 yuan to 788 yuan, changing its valuation basis from 65 times forecast 2028 earnings to 30 times forecast 2027 earnings per share of 26.27 yuan; the new multiple is in line with the median price-to-earnings ratio of China's A-share compound semiconductor sector.
The bank maintained its neutral rating, viewing geopolitical risks as the main obstacle to the company's global market expansion. Weaker-than-expected optical module demand or penetration of near-packaged and co-packaged optics, as well as supply-chain diversification by major customers, would also affect its assessment.