How fast did revenue grow, and why did profit fail to keep pace?
- In the third quarter of 2026, the company reported revenue of 1.007 billion yuan, up 53% quarter on quarter and 27% above Nomura’s forecast. Net profit attributable to shareholders was 119 million yuan, up 7% quarter on quarter but 29% below Nomura’s forecast.
- Nomura believes revenue growth was driven mainly by strong demand for high-density passive interconnect products such as MPO and MMC, along with capacity expansion. Revenue grew faster than profit primarily because the quarterly profit margin declined.
Where did the pressure on margins come from?
- Third-quarter gross margin was 26.9%, down 9.2 percentage points year on year and 6.3 percentage points quarter on quarter. Nomura identifies rising costs for components such as optical fiber and ferrules, as well as depreciation during the capacity expansion ramp-up, as the main causes.
- Net margin was 11.8%, down 10.8 percentage points year on year and 5.0 percentage points quarter on quarter. Nomura attributes this to a lower gross margin and higher operating expenses; third-quarter operating expenses rose to 131 million yuan from 101 million yuan in the second quarter.
Why does Nomura remain optimistic about future growth?
- Nomura believes the company’s MPO products benefit from demand for high-end optical modules. It expects increased use of high-end MPO products and optical fiber patch panels in near-package optics (NPO) and co-packaged optics (CPO) to further support revenue and margin expansion.
- Nomura maintained its Buy rating and price target of 231.5 yuan, based on its forecast fiscal 2027 earnings per share of 3.99 yuan and a price-to-earnings multiple of 58. Downside risks cited by the bank include weaker-than-expected demand for optical devices or CPO penetration, and supply chain diversification by major customers.