Nomura initiates Shenzhen T&S Communication stock with Buy rating

Nomura/Instinet initiated coverage on Shenzhen T&S Communication (SZ:300570) with a Buy rating and a RMB153.00 price target, citing the company's strong positioning to capitalize on the rapidly expanding global AI networking market. As a core supplier to Corning, Shenzhen T&S is poised to benefit from increasing demand for AI infrastructure products like MPO and shuffle boxes, with content upgrades and component self-supply expected to drive margin expansion. Nomura projects robust growth for the company, estimating a 46% revenue CAGR and 52% earnings CAGR for fiscal years 2025-2027, highlighting its significant potential amid accelerating AI infrastructure investment.

Analysis

Nomura/Instinet has initiated coverage on Shenzhen T&S Communication (SZ:300570) with a Buy rating and a RMB153.00 price target, signaling strong confidence in the company's growth trajectory. The core of the investment thesis rests on Shenzhen T&S's strategic position as a key supplier within the expanding global AI networking market, directly benefiting from accelerated infrastructure investments. A critical factor is its relationship with Corning, which accounted for 70% of its revenue in 2024, positioning T&S to capitalize on increasing demand for AI-related products like MPO and shuffle boxes. Nomura anticipates margin expansion driven by internal improvements, specifically through content upgrades in its MPO products and the vertical integration of key components like MT ferrule. The firm's aggressive growth projections, including a 46% revenue CAGR and a 52% earnings CAGR for fiscal years 2025-2027, underpin the valuation, with the price target derived from a high multiple of 52 times forecasted FY26 earnings.

Key Decisions for Investors

• Given the strong analyst endorsement and projected 52% earnings CAGR tied to the AI infrastructure boom, growth-oriented investors may view this as a compelling entry point.
• Investors must closely monitor the company's significant revenue concentration, as its heavy dependence on Corning (70% of 2024 revenue) presents both a substantial opportunity and a key risk factor.
• The valuation is predicated on a high 52x FY26 P/E multiple, so investors should be aware that the stock is priced for perfection and any failure to meet aggressive growth targets could trigger a significant price correction.
• Tracking the company's ability to deliver on margin expansion through product upgrades and component self-sourcing is crucial to validating the long-term profitability thesis.