High margin new businesses have started to ramp up, pointing to significant GM expansion in coming years; Buy

Goldman Sachs notes that ZDT's 3Q26 core business operating profit was 10%/11% above GSe and BBG consensus, driven by a better product mix: high-margin, high-growth sectors reached 27% of total revenue versus an expected 20-25%. 3Q26 gross margin came in 1.8/2.6pp above GSe/BBG consensus and was up 27.7%/4.6pp QoQ and 5.7pp YoY, with YoY growth almost entirely from better product mix and new business contribution (ABF, optical module, AI PCB). OPEX rose 24% QoQ and 56% YoY, reflecting higher R&D investment in future high-end AI PCB, optical transceiver and substrate businesses, leaving the OPEX-to-sales ratio 0.7-1.4pp above consensus. For 4Q26, ZDT revenue is expected to grow about 29% QoQ on solid growth in optical transceivers, substrates and AI PCB, with new AI projects ramping. Management expects gross margin to expand further to about 30%, with high-growth/high-margin new businesses reaching 30-35% of revenue and overall GM at least 40-45%. The analyst stays positive on the AI bu