Everbright Securities has released a research report forecasting that CIG's (06166) net profit attributable to shareholders for 2026-2028 will be RMB 20.72 billion, RMB 33.33 billion, and RMB 52.59 billion, representing year-on-year growth of 686%, 61%, and 58% respectively. The company's share price of HKD 142.7 as of May 22, 2026, corresponds to a PE ratio of 21x, 13x, and 8x for the years 2026-2028, which is below the average PE ratio of comparable companies. The rating is based on several factors: 1) The company has commenced volume shipments of its 800G optical modules to key customers; its 1.6T products have completed customer sampling and are poised for mass production within 2026. 2) The expansion of the company's Malaysian factory is progressing smoothly, and it has successfully passed certification by a major customer. Coupled with securing upstream suppliers for core materials like optical chips, bottlenecks in both capacity and raw materials have been alleviated. 3) The company continues to advance research and development in cutting-edge optical communication technologies, with the gap to leading companies expected to narrow further. The firm believes CIG possesses a degree of scarcity value and premium potential, initiating coverage with a "Buy" rating. The main points from Everbright Securities are as follows: CIG is a leading provider of information communication and high-speed optical module equipment. Founded in 2006, the company listed on the Shanghai Stock Exchange Main Board in November 2017 and on the Hong Kong Stock Exchange Main Board in October 2025, setting the record for the largest IPO in the communication equipment industry's history for an "A+H" listing. The company's primary businesses are categorized into three segments: high-speed optical modules, telecom broadband, and wireless networks & edge computing, serving major global telecom operators and internet data center clients. In 2025, the company achieved revenue of RMB 48.2 billion, a year-on-year increase of 32.07%, with optical module products contributing 34.7% of the total, up 21.3 percentage points. Gross profit for 2025 was RMB 10.8 billion, up 41.2% year-on-year; net profit attributable to shareholders was RMB 2.6 billion, primarily driven by growth in optical module product revenue. Rising demand for high-speed optical modules, fueled by AI computing power, is driving both volume and price increases in the optical module market, with 1.6T products beginning to scale. Significant growth in global AI capital expenditure, with the combined Capex guidance for the four major North American CSPs nearing $690 billion for 2026, is propelling the data center supply chain into a new expansion cycle. In the medium to long term, Scale-Up technology architectures will lead to a non-linear increase in optical module usage. Regarding market size, the global optical module market was approximately $17.8 billion in 2024 and is projected to grow to $41.5 billion by 2029, representing a CAGR of 18.5%. China's optical module market is expected to expand from RMB 32.9 billion in 2024 to RMB 87.2 billion in 2029, with a CAGR of 21.5%. From the perspective of the industry chain and competitive landscape, upstream core components possess significant technological barriers and represent high-value-added segments. The midstream optical module market is highly concentrated, with the global CR5 exceeding 50% and Chinese companies holding a dominant position. New optical communication technology routes like CPO and OCS may partially substitute for some traditional optical module demand in the short term, but the firm believes demand for high-end optical modules will continue to grow over the long term. The company has acquired core high-speed optical module technology through external mergers and acquisitions, with 1.6T products expected to achieve mass production in 2026. 1) Accelerated product iterations: Through acquisitions of MACOM and Lumentum's (Oclaro) core optical module assets, the company successfully obtained key technologies and patents for 100G to 400G optical components and modules, shortening R&D cycles and entering the global high-speed optical module arena. Currently, the company's silicon photonics-based 800G products are being shipped in volume to key overseas customers; next-generation 1.6T products completed sampling in Q4 2025. Simultaneously, the company has initiated R&D for technologies like ELSFP and 3.2T/6.4T NPO/CPO, with samples expected to be provided to customers in 2026. 2) Deep integration with core supply chains: The company proactively secures upstream core materials to ensure production. It has established strategic supply guarantee agreements with five CW light source suppliers and holds equity stakes in two of them (Nanjing Raycore, Dingxin Optoelectronics). It has also preemptively secured supply arrangements for key materials like silicon photonics chips and DSPs. 3) Global capacity expansion: Utilizing a "co-location + own factory" model, the company achieves low-cost, highly flexible capacity expansion. In 2025, its Malaysian base passed certification by a major North American customer, and expansion is proceeding smoothly. Risk factors include: fluctuations in raw material prices and supply chain disruption risks, changes in international trade policies and tariff risks, volatility in customer demand, risks associated with technology iteration and product development falling short of expectations, market competition risks, and foreign exchange rate fluctuation risks.