Goldman Sachs interprets New Yi Sheng’s financial report: Q2 profit far exceeds expectations, and shipments of 800G/1.6T optical modules will continue to increase.

Goldman Sachs interprets New Yi Sheng’s financial report: Q2 profit far exceeds expectations, and shipments of 800G/1.6T optical modules will continue to increase.

Based on New Yisheng's recently announced estimated net profit for the first half of the year, Goldman Sachs has comprehensively raised its profit forecasts for 2026 to 2028 and increased New Yisheng's 12-month target price.

Wallstreetcn previously reported that New Yisheng announced its 2026 first-half performance forecast on July 19, estimating a net profit attributable to shareholders of 7 to 8 billion yuan, an increase of 77.56% to 102.93% year-on-year, with the growth rate of net profit excluding non-recurring gains and losses basically synchronized; the main business growth remains robust. Continued growth in AI computing power investment and product structure optimization are the main driving forces, with strong demand for high-rate optical modules. As a key player in the industry chain, the company continues to benefit from high industry prosperity.

According to Chase Wind Trading Desk, Goldman Sachs noted in its July 20 research report that, driven by surging AI capital expenditure and strong product upgrade toward high-speed optical modules, the median guidance for New Yisheng’s net profit in Q2 2026 exceeded expectations by 44%. With improvement in supply of optical chips and expansion of the company's production capacity, shipments of 800G and 1.6T optical modules are accelerating.

Based on strong fundamentals and shipment expectations, Goldman Sachs has fully raised New Yisheng's profit forecasts for 2026-2028 and increased the 12-month target price substantially from 600.71 yuan to 633.0 yuan, reiterating its “Buy” rating. This marks that, amid continuing explosion of AI computing demand, accelerated ramp-up of New Yisheng's high-end products will bring high earnings certainty and valuation premium.

Q2 Net Profit Far Exceeds Expectations: AI Capital Expenditure Drives Demand Boom

New Yisheng's estimate for net profit in the first half of 2026 is 7 to 8 billion yuan. Combining with the disclosed Q1 net profit of 2.774 billion yuan, the implied Q2 net profit range is 4.2 to 6.2 billion yuan, a year-on-year increase of 78% to 163%.

Goldman Sachs points out that the core driving factors behind the performance surprise are: first, continued expansion of AI capital expenditure drives strong demand for high-speed optical modules; second, the company's product portfolio continuously upgrades toward high-speed optical modules, combined with improved optical chip supply and expanded production capacity, drives sequential growth in revenue and net profit.

From a quarterly perspective, Goldman Sachs forecasts diluted EPS for each quarter of 2026 as follows: Q1: 1.99 yuan, Q2: 3.34 yuan, Q3: 4.56 yuan, Q4: 4.96 yuan, showing sustained acceleration throughout the year.

800G/1.6T Optical Modules Accelerate: Contribution Will Continue Rising in Second Half

Goldman Sachs attributes the structural cause of this performance surprise to the accelerated ramp-up of 800G/1.6T optical modules. As supply bottlenecks for optical chips gradually ease and the company’s production capacity expansion progresses, shipments of high-speed optical modules are entering a rapid growth channel.

Looking forward to the second half of 2026, Goldman Sachs expects the following trends to further strengthen:

  • The revenue contribution of 1.6T optical modules will further increase;
  • Silicon Photonics products penetration will continue to rise;
  • Customer demand for 800G+ products remains strong, supporting shipment growth.

Although optical chip industry supply remains tight in the short term, Goldman Sachs believes that rising silicon photonics penetration and expansion of overall industry capacity will provide strong support for future shipment growth.

Over the longer term, Goldman Sachs anticipates that from 2027 onward, demand will shift from the current focus on scale-out expansion to gradual evolution toward scale-up and scale-across expansion, opening new incremental space for the company.

Overall, New Yisheng’s performance forecast delivers three positive signals: on the demand side, expansion of AI capital expenditure drives sustained strong demand for high-speed optical modules; on the supply side, improved supply of optical chips and expansion of company capacity provide dual support; on the structural side, rapid migration of product mix toward high-value 800G/1.6T products supports steady improvement in gross margin.

Comprehensively Raised Profit Forecast, Target Price Increased to 633 Yuan

Given the strong Q2 guidance and increased shipments of 800G/1.6T optical modules due to improved optical chip supply and capacity expansion, Goldman Sachs raised New Yisheng's earnings forecasts for 2026, 2027, and 2028 by 7%, 2%, and 2% respectively. Key data forecasts:

2026: Revenue forecast of 51.457 billion yuan, net profit of 20.683 billion yuan.2027: Revenue forecast of 73.911 billion yuan, net profit of 30.08 billion yuan.2028: Revenue forecast of 84.975 billion yuan, net profit of 34.576 billion yuan.

Revenue and net profit forecasts for 2027 and 2028 were both raised about 2%, reflecting Goldman Sachs’ sustained optimism for long-term high-speed optical module shipment growth.

In valuation, Goldman Sachs uses the recent P/E ratio method for New Yisheng, taking the forecasted 2027 net profit as basis with a target P/E ratio of 29.3 times (previously 28.4 times), corresponding to a 12-month target price raised from 600.71 to 633 yuan.

Goldman Sachs indicates that a target P/E of 29.3 times is basically in line with New Yisheng's historical average forward P/E ratio of 28 times since September 2018, demonstrating consistency in valuation logic. The target P/E is determined with reference to industry peers’ trading P/E ratios and average fundamental indicators (net profit growth rate and operating margin), using average net profit growth and average operating margin for 2027-2028 as input parameters.

Current stock price is 482.88 yuan (as of closing on July 17, 2026); the target price of 633 yuan implies 31.1% potential upside, with company market value at about 672 billion yuan (around $99.2 billion USD).

 

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