CICC: Covering Xizhi Technology-P (01879) for the first time to outperform the industry rating target price of HK$362.00

The Zhitong Finance App learned that CICC released a research report saying that for the first time, it covered Xizhi Technology-P (01879) to give the industry a performance rating. The target price was HK$362.00, which corresponds to a valuation multiplier of 17 times in 2028. The company is a solution leader in global optical computing and domestic scale-up optical connectivity. The bank is optimistic about the company's long-term growth under the two-wheel drive of optical computing+optical interconnection. The bank believes that Xizhi is a global leader in optical computing, and that the optical computing business is also a key increase in long-term space. Potential catalysts are scale-up NPO solutions; expansion of PACE 3 commercial scenarios.

CICC's main views are as follows:

Relying on full-stack self-developed optoelectronic chip technology (OMac, OnoC, and ONet), Xizhi has formed a two-wheel drive development path that uses optical computing to open up the long-term computing power efficiency ceiling and undertakes AI cluster expansion needs with optical interconnection. The compound revenue growth rate from 2023 to 2025 was 67%. Of the company's total revenue of 106 million yuan in 2025, the optical interconnection and optical computing sectors contributed 79% and 21% respectively. Xizhi ranked first among domestic independent scale-up optical interconnection solution providers in 2025; as of 24, the cumulative shipment volume of optical computing chips ranked first in the world.

The optical interconnection business is expected to benefit from the accelerated development of domestic supernode architectures

There is still a gap in the performance of domestic AI chips compared to overseas cards. It is even more necessary to improve the overall computing power utilization rate of the cluster and mitigate single-chip performance bottlenecks through an efficient scale-up network. Optical interconnection solutions are also accelerating penetration. Xizhi Technology currently has a full range of product matrices in the field of optical interconnection, from EPS and distributed OCS to NPO and CPO, and commercialization progress is at the forefront of the industry. The bank believes that this sector is expected to fully benefit from the development trend of domestic supernodes.

Outstanding supply chain card advantages, empowering domestic infrastructure

The company has established a stable and diversified supply chain system. The core optical interconnection and optical computing products are mainly based on mature processes and widely available components, and do not rely on advanced process nodes. After 4Q24 US export controls, the company successfully switched follow-up projects to domestic manufacturing partners.

Profit forecasting and valuation

The bank expects revenue of 2026-28 to be 214 million yuan, 494 million yuan and 1,726 million yuan. EPS is -10.03 yuan, -6.06 yuan, and -1.83 yuan, respectively. The loss margin is narrowing year by year. An outperforming industry rating was given. The current stock price corresponds to 2028 13x P/S, with reference to comparable company valuations. The bank gave Xizhi Technology a target price of HK$362 based on 17 times P/S in 2028, corresponding to 55% upward space.

Risk warning: Product commercialization falls short of expectations, customer demand fluctuations and customer concentration risks, rapid iteration of technology and R&D progress falling short of expectations, competitive risks of alternative technologies such as electrical interconnection, risk of supply chain and third-party manufacturing dependency, and continued loss and profitability improvements falling short of expectations.