Key Takeaways:
Citi Research nearly doubled its price target on Eoptolink to 701 yuan, projecting the global optical interconnect market will reach $92 billion by 2028.
"AI data center expansion is driving an unprecedented upgrade cycle from 800G to 1.6T and 3.2T optical modules," the Citi analysts wrote in a June 24 report.
The new target implies roughly 20 times 2027 estimated earnings, compared with the stock's five-year historical average. Citi also raised targets on DSBJ to 350 yuan from 225 yuan and on Tianfu Communication to 419 yuan from 318.57 yuan, while downgrading T&S Communications to Sell from Buy with a 152 yuan target.
The upgrades reflect a structural shift in optical networking from a cyclical telecom business to an AI infrastructure play. Citi estimates the market will expand at a 65% compound annual rate through 2028, with high-speed products above 800G accounting for 89% of data center shipments by then.
The report marks one of the most aggressive calls on the Chinese optical supply chain from a major Wall Street bank. Citi's base case assumes 1.6T transceiver shipments will grow at a 215% compound annual rate from 2025 to 2028, while 3.2T modules begin ramping in 2027. Silicon photonics penetration in high-speed modules is expected to rise to 60% from 29% over the same period, driving demand for CW laser chips at a 114% CAGR.
Eoptolink is the primary beneficiary in Citi's analysis. The bank raised its 2026 and 2027 net profit forecasts by 8% and 13% respectively, citing 3.2T product shipments and NPO optical engine orders. Gross margins are projected to hold above 52% through 2028, roughly 10 percentage points above peers, reflecting the company's cost controls and ties to US hyperscalers.
DSBJ's upgrade reflects a broader reassessment. Citi now values the company on a sum-of-the-parts basis, separating its traditional PCB business from AI optics and optical chips. The AI optics segment is expected to drive the majority of profit growth in coming years.
Tianfu Communication's 32% target increase is tied to CPO adoption. The bank sees the company's optical engine and FAU components as key enablers as co-packaged optics move from lab to volume production after 2027.
The downgrade of T&S Communications highlights the divergence within the sector. Citi cited risks from decoupling with Corning, intensifying Asian supply chain competition, and a valuation of 59 times 2027 earnings — more than double the target's implied multiple of 31.8 times.
The call signals that Citi sees the optical interconnect cycle as structurally different from past telecom-driven booms, with AI compute clusters creating sustained demand for bandwidth upgrades. Investors will watch for order disclosures from Eoptolink and its peers in the coming quarters to validate whether production can keep pace with the bullish demand assumptions.
This article is for informational purposes only and does not constitute investment advice.
