Citi: Dongshan Precision’s third-quarter profit meets expectations; Citi estimates optical modules contributed 1.5 billion yuan in net profit

How did third-quarter results compare with expectations?

Dongshan Precision reported third-quarter 2026 revenue of 17.6 billion yuan, up 74% year over year; it was 2% below Citi’s forecast but 1% above Bloomberg consensus.
Net profit for the quarter was 2.3 billion yuan, and adjusted net profit was 2.1 billion yuan. Citi said the results were broadly in line with its forecast of 2.2 billion yuan, Bloomberg consensus of 2.1 billion yuan, and buy-side expectations of approximately 2.2 billion yuan derived from its discussions with investors.

Third-quarter gross margin was 23.1%, up 9.0 percentage points year over year and 2.2 percentage points quarter over quarter; gross profit was 4.1 billion yuan, up 184% year over year and 32% quarter over quarter. Citi believes contributions from the optical business may explain the improvement in gross margin, while flexible printed circuit boards face price pressure.
Operating margin rose to 16.1%, up 10.2 percentage points year over year and 2.6 percentage points quarter over quarter; operating profit was 2.8 billion yuan, up 370% year over year and 43% quarter over quarter.

Citi estimates that Dongshan Precision’s third-quarter optical module revenue was approximately 5.8 billion yuan and net profit approximately 1.5 billion yuan, equivalent to roughly one-third of the company’s total quarterly revenue and two-thirds of its net profit, respectively.
The bank estimates that approximately 600 thousand 400G optical modules and 1.8 million 800G modules were shipped during the quarter. The company plans to hold an earnings call on 2 November, and Citi will look for further business details.

Citi has a buy rating and a target price of 275 yuan, using a sum-of-the-parts valuation: the existing businesses are valued at 15 times expected 2026 earnings, while the optical module, optical chip and AI circuit board businesses are valued at 15 times, 50 times and 20 times expected 2027 earnings, respectively.
The base case assumes 2027 net margins of 30%, 40% and 20% for the optical module, optical chip and AI circuit board businesses, respectively. Downside risks identified by Citi include slower-than-expected business expansion, rising material costs, and continued losses in the optoelectronics business amid weak demand and intensifying competition.