(Yicai) Aug. 25 -- Shares of Huilyu Ecological Technology Group jumped after it announced a CNY700 million (USD98 million) deal to boost production of optical communication modules for use in artificial intelligence data transmission.

After gaining by as much as 8.7 percent in morning trading today, Huilyu Ecological Technology [SHE: 001267] closed up 2.9 percent at CNY13.46 (USD1.88) a share. Stocks in Shenzhen added 2.3 percent. Huilyu Ecological’s shares have now climbed 76 percent since the end of last year.

Subsidiary Junheng Technology signed the investment agreement with the administrative committee of Ezhou Airport Economic Zone in China’s central Hubei province, its Wuhan-based parent company announced late on Aug. 23.

The project will unfold in two phases and lead to an annual output capacity of 4.5 million optical modules operating at 400 gigabits per second or higher data rates, to better meet market demand for high-speed, high-capacity optical communication modules, the company said.

Such modules are mainly used in AI server clusters, as well as ultra-large data centers, and core nodes of backbone networks. With two factories in China and one in Malaysia, Junheng Technology can turn out more than 1.2 million a year at present.

Under the agreement, the Ezhou project’s first phase will have investment of CNY200 million and a planned annual output capacity of 1.5 million optical modules. The local government will provide leased factory space and staff accommodation to Junheng Technology. Trial production is set to start within four months of the lease.

The second phase will have investment of CNY500 million and production capacity of 3 million units per year. Junheng Technology aims to begin production in this phase within two years of obtaining the necessary land use rights and building permits.

Huilyu Ecological’s main business is landscaping. It acquired a minority stake in Junheng Technology last year, thereby diversifying into optical communication components, and gained control of the firm this February with a 51 percent stake. Per a capital-raising plan released last month, Huilyu Ecological aims to take complete ownership.

Ezhou is home to Asia’s first dedicated cargo air transport hub, Ezhou Huahu International Airport, and it has well developed logistics operations. Ezhou Airport Economic Zone is in the area surrounding the airport.

Editor: Tom Litting