What stocks are expected to surge in October 2026?

Today is September 22, 2026. With the Mid-Autumn Festival and National Day holidays approaching, the market will remain closed for an extended period. After the holiday break, we will enter October—making now the ideal time for early positioning. Today, we are particularly bullish on Dongshan Precision. This company—Suzhou Dongshan Precision—originally specialized in sheet metal fabrication and has since expanded significantly through multiple acquisitions. It is now the world’s No. 2 flexible printed circuit (FPC) manufacturer and No. 3 printed circuit board (PCB) manufacturer globally. Following its acquisition of Source Photonics, it has transformed into an AI computing hardware platform enterprise. Its four core businesses are: electronic circuits, optical modules, precision components, and optoelectronic display modules. It uniquely possesses server PCBs, self-developed optical chips, and high-speed optical modules—making it one of the few companies in the market equipped with *both* core AI computing hardware components, thereby enabling strong synergies. Source Photonics owns full-stack capabilities in optical chip design and wafer fabrication—not merely packaging—and has already laid groundwork for 1.6T optical modules and subsequent co-packaged optics (CPO) solutions. In the first half of this year, the stock delivered a strong primary uptrend, peaking on July 15 before undergoing a rapid correction. It bottomed out in early August and rebounded, then entered a sideways consolidation range in mid-to-late August.

Dongshan Precision: A Value Reassessment Triggered by an Acquisition

Unlike Dongshan Precision, Source Photonics has achieved substantial price increases for its products, driving upward momentum in its gross margin. As of the first half of 2025, Source Photonics’ overall gross margin stood at 26.9%, providing a strong complementary boost to Dongshan Precision. In terms of customer structure, Source Photonics also complements Dongshan Precision well. Its core customers include telecom equipment suppliers such as Cisco and Ericsson, while it is also gaining entry into the supply chains of major U.S. cloud service providers—including Microsoft, Meta, and Amazon. In the first half of this year, Source Photonics’ net profit accounted for 38.6% of Dongshan Precision’s total net profit—a notably high proportion. With full consolidation scheduled for the end of 2025, Source Photonics’ optical module business is projected to double its revenue in 2026—matching industry peers—and thus meaningfully supplement Dongshan Precision’s top- and bottom-line performance, underscoring how the acquisition is reshaping the company’s business structure. However, even with an optimistic outlook for Source Photonics, Dongshan Precision’s current share price should not be inflated excessively. From a valuation perspective, the stock is clearly overvalued today. III. Higher Valuation = Higher Risk No matter how scarce Source Photonics may seem, one fact remains certain: there is no authoritative information confirming that the company supplies NVIDIA directly. In terms of market share, Source Photonics holds only a 3.1% share in the optical module market, with revenues still confined to the low-tens-of-billions RMB range—insufficient to absorb large-scale orders. Currently, its capacity utilization rate has already climbed to 90%. To meet surging demand, expansion is highly likely. Yet optical module capacity ramp-up is inherently slow—typically requiring 6–18 months—and industry leaders such as Innolight and Eoptolink are also aggressively expanding capacity; Source Photonics therefore lacks a first-mover advantage. Moreover, for a company of its scale, yield rates during expansion pose a significant challenge. Returning to Dongshan Precision’s core business: misalignment between AI and consumer electronics demand cycles, coupled with high customer concentration, continues to weigh on its main operations. Additionally, just prior to its planned listing on the Hong Kong Stock Exchange, Dongshan Precision completed the 100% acquisition of French automotive parts manufacturer GMD Group—including debt restructuring—at a total consideration of approximately €100 million (RMB ~¥814 million). Yet in 2024, GMD reported revenue of €1.012 billion and net profit of only €3 million—corresponding to a net margin below 1%, indicating severely diminished operational vitality. In the automotive components sector, Dongshan Precision primarily supplies Tesla—but Tesla’s recent automotive business performance is widely known. Under these circumstances, acquiring GMD may further dilute margins and increase operational burdens. Thus, from a valuation standpoint, Dongshan Precision’s core business warrants no high expectations—its fair P/E ratio caps at around 15x. Even incorporating optimistic projections for Source Photonics, a consolidated P/E of 30x would be reasonable. Yet according to Huajin Securities’ forecast data, the company’s 2025 P/E has already reached 64x, and its projected 2026 P/E stands at 31x. Although the optical module business indeed opens up considerable growth potential, stock price volatility may be extremely sharp during the gap between order acquisition and actual mass production/delivery. As of Q3 this year, Dongshan Precision holds ¥6.675 billion in cash and cash equivalents, ¥7.286 billion in inventory, ¥6.957 billion in short-term borrowings, and ¥5.418 billion in long-term borrowings—indicating notable near-term liquidity pressure.

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BMO Capital raised its price target for Solstice Advanced Materials to $87, maintaining an Outperform rating driven by activist-led cost-cutting initiatives. The company focuses on Refrigerants and Nuclear divisions following a Q2 earnings beat and merger termination.

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