Our target price for Accelink of Rmb29.0 is based on 20.0x 2025E EPS, 1SD below the stock’s 5-year historical forward PER. We believe a P/E multiple is the most appropriate valuation methodology to capture Accelink’s growth momentum driven by fast industry growth and its market-share expansion.

Upside risks that could prevent the shares from reaching our target price include: 1) Higher-than-expected optical network capex by telcos and corporates/government in China; 2) Margin expansion due to less price competition with its rivals; 3) Market share gains; and 4) Higher-than-expected datacenter investments and transceiver demand.