Yuanta Securities: Zhongjin Xuchuang's first-half performance slightly exceeds expectations, maintaining a "buy" recommendation.

The report from Yuanta Securities points out that the performance of Zhongji Xuchuang in the first half of the year slightly exceeded expectations, and the 1.6T optical module will bring new growth momentum. The growth in performance in the first half of the year was mainly due to the continued construction of computing power infrastructure by end customers, strong growth in capital expenditure leading to a significant increase in sales of high-end optical modules such as 800G, continuous optimization of product structure, driving a substantial increase in the company's operating income and net profit year-on-year. On July 15th, NVIDIA announced that it will resume sales of H20 in China and launch new fully compliant GPUs for the Chinese market. NVIDIA stated that the U.S. government has assured NVIDIA of granting licenses, and the company hopes to start deliveries soon. It is expected that the domestic market will quickly resume purchases in the short term, benefiting companies in the NVIDIA industrial chain such as Zhongji Xuchuang. Moreover, concerns about tariffs in the market are expected to be further alleviated. Currently, the company's overseas revenue accounts for approximately 88%, with most exports to large factories related to the United States. With the easing of trade disputes, the company's performance is expected to remain stable and maintain high growth. The company is believed to have sufficient technological reserves and is expected to maintain its industry leading position in the era of high demand for AI. Considering the expected rapid increase in the penetration rate of 1.6T next year and the continued strong demand for AI computing power, the "buy" recommendation is maintained.