[Opportunity Express] Yangtze Optical Fibre: A "globally leading" optical fibre and cable company, with its share price hitting new highs consecutively, is it set to embark on a new growth trajectory?

With the Federal Reserve's rate-cutting cycle underway, expectations for improved market liquidity, coupled with Hong Kong stocks being at historically low valuations, have helped restore market sentiment, driving a robust rebound in some high-quality stocks. Among them, one company in the optical cable sector has stood out remarkably—a 'global leader' in the optical fiber and cable industry.$YOFC (06869.HK)$ , with year-to-date gains exceeding 400%.

What are the factors driving Changfei's rise? Is there still an opportunity to invest? This week, Opportunity Express will explore these questions with everyone. We will focus on sharing insights from several aspects, including an overview of Changfei’s industry, its core business operations, growth drivers, and trading opportunities.

Leading the optical fiber and cable industry in both 'technology and sales'

$YOFC (06869.HK)$is a global leading supplier of optical fiber preforms, optical fibers, and cables.Its products may sound abstract, but in fact, they are deeply integrated into various aspects of our daily lives, such as home fiber broadband, dedicated networks operated by major telecom operators, and even undersea cables that help us access foreign websites and facilitate international financial transactions. In simple terms, optical fibers are like water pipes in the communication world, efficiently and reliably transmitting information.

In the optical fiber and cable industry chain, upstream comprises raw material suppliers, midstream involves optical fiber preform manufacturing, and downstream covers optical fiber and cable production.Among these segments, the preform represents the most valuable and technologically demanding part. Optical fiber preforms are essential for drawing fibers and cabling. Within the entire value chain, the profit distribution for optical fiber preforms, optical fibers, and cables is 7:2:1, with the preform offering the highest profitability. Therefore, whoever masters the technology for optical fiber preforms holds pricing power and controls the lifeline of the optical fiber industry.。This is precisely where Changfei's advantage lies,as it is currently the only company in the world to have mastered and industrialized the three major preform technologies—PCVD, OVD, and VAD.It owns the world's largest production base for optical fiber preforms in Qianjiang, Hubei Province. Since 2016, Changfei has ranked first globally in the sales of optical fiber preforms, optical fibers, and optical cables for eight consecutive years.

Moreover, the hollow-core fiber technology currently mastered by Changfei is considered a disruptive technology for the next generation of optical communications.Completely different from traditional solid-core fibers (which rely on glass to guide light), the core of hollow-core fiber is hollow, utilizing special microstructure designs to confine light transmission within air, significantly improving losses, latency, and speed during information transmission. Hollow-core fiber boasts broad application prospects, especially in scenarios with extreme network performance requirements, such as AI-powered data center interconnections, high-frequency financial trading, quantum communication, and high-power laser transmission.

Changfei’s Business Logic

Looking specifically at Changfei’s business situation, the company's revenue over the past three years has remained above 12 billion yuan, showing a significant increase compared to 2019-2021. However, last year’s revenue was 12.197 billion yuan, representing a 9% year-on-year decline, primarily due to weak global demand for optical fiber and cable, as well as price pressures caused by intensified industry competition.

Nevertheless, Changfei is actively addressing these challenges through diversified strategies, such as accelerating its deployment in new businesses like silicon carbide, lasers, and submarine cables. According to the latest H1 2025 revenue data released, the company’s H1 revenue reached 6.384 billion yuan, up 19% from last year, indicating clear improvements in revenue performance.

Data source: Futubull

In detail, Currently, Changfei’s main business is divided into two major segments: its traditional core business (optical transmission products) and emerging high-growth businesses (optical interconnection components, hollow-core fiber, semiconductors, etc.).。According to the data disclosed in H1 2025, optical transmission products are the main revenue driver, accounting for over 60%; optical interconnection components account for 22%, becoming a new growth point for the company.

Looking back at the revenue composition of various businesses from 2019 to 2023 (PS: no detailed data disclosed for 2024-2025), optical cables, optical fibers, and optical fiber preforms had the highest revenue share. Among them, the gross margin of optical fibers and optical fiber preforms was as high as 53%, far exceeding other business segments, serving as the core profit source for Yangtze Optical Fibre and Cable Joint Stock Limited Company (YOFC). This also indirectly confirms YOFC’s dominant strength in the optical fiber and optical fiber preform sectors.

Data source: Futubull

Core Business: Optical Transmission Products

Optical transmission products (optical fibers and cables) serve as the cornerstone of the company’s revenue and profits. The downstream customers of this business segment are primarily China’s three major telecom operators: China Mobile, China Telecom, and China Unicom. YOFC relies on bulk procurement orders from these three key clients.

In the first half of this year, optical transmission products generated revenue of RMB 3.847 billion, representing a 9% year-on-year increase; the gross margin reached approximately 29.6%, a decline of 4.5% compared to the same period last year. Currently, this business faces pressure from reduced bulk procurement prices by operators such as China Mobile (the average bid price for optical cables in 2025 declined by about 26% year-on-year). Additionally, the company’s market share in the latest bulk procurement dropped from approximately 20% to 14%.

To address pricing pressures in the traditional optical fiber sector, YOFC considers breakthroughs in cutting-edge technologies such as hollow-core optical fibers as a critical solution. It is accelerating testing and commercialization efforts. In August this year, YOFC assisted China Mobile in building China’s first hollow-core optical fiber line in the Guangdong-Hong Kong-Macao Greater Bay Area. This line primarily serves data transmission between the Shenzhen and Hong Kong stock exchanges, reducing cross-border securities trading latency between Shenzhen and Hong Kong to 1 millisecond and achieving an optical fiber loss of 0.09 dB/km, setting a new global record for the lowest optical fiber loss in commercial use.

Although the successful testing of hollow-core optical fibers is positive news driving the stock price higher, it still has one final step before generating substantial earnings—mass production. Whether it can be successfully commercialized will be a key determinant of future stock price levels, and investors should closely monitor subsequent developments.

Growth Point: Optical Interconnect Business and Others

The optical interconnect components business has become a new highlight in the company's performance. In the first half of 2025, it achieved revenue of 1.444 billion yuan, representing a year-on-year increase of 54.6%; the gross profit margin reached approximately 40.7%, an increase of 18 percentage points compared to the same period last year. Among this, the subsidiary Changxin Sheng performed particularly outstandingly, achieving revenue of 1.04 billion yuan in the first half of the year, a year-on-year increase of 145%, with net profit reaching 297 million yuan, reflecting a year-on-year increase of 299%.

The optical interconnect components business has precisely capitalized on the development opportunities brought by AI computing infrastructure, efficiently addressing transmission issues within data centers. Currently, Changxin Sheng’s AOC products are directly supplied to several leading AI server manufacturers.

In addition, Changfei is actively advancing its diversification strategy through mergers and acquisitions combined with independent research and development. The company not only integrates upstream and downstream applications of industrial lasers through the acquisition of Ben Teng Laser but also extends its technology to high-purity quartz materials and submarine optical cable engineering fields. Meanwhile, its third-generation semiconductor production base in Wuhan has officially commenced operations. Although these new businesses are still in the investment phase and their contribution to current earnings is limited, they undoubtedly lay a solid foundation for the company’s long-term growth in the future.

Investment Strategy

From a technical perspective, $YOFC (06869.HK)$ After confirming the upward trend in early June, the momentum has continued strongly. On August 29, following the release of the H1 financial results, Changfei’s optical interconnect components and hollow-core fiber concepts have made it a scarce target in the Hong Kong stock market, attracting significant thematic and trend-following investment funds, further driving the share price up to a high of 65 yuan.

Overall, Changfei’s daily chart continues to show an upward trend, and fellow investors holding positions can remain optimistic for now. In recent trading sessions, the share price has experienced short-term consolidation, but trading volume has rapidly contracted, indicating limited selling pressure, with shareholders reluctant to sell, suggesting a higher probability of further upside.

For those fellow investors who have not yet taken a position and are observing, key attention should be paid to the EMA50 support level, currently at a reference price of 41.6 yuan, which can be regarded as a critical buying point after a pullback. However, if the share price subsequently falls below the EMA50 line and the EMA12 and EMA50 lines form a death cross, caution against a downtrend is advised, and profit-taking or stop-loss strategies should be promptly implemented. (PS: The above technical analysis is for educational reference only and does not constitute actual operational advice.)

Data Source: Futubull

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Risk Disclosure: This content does not constitute a research report and is for reference only. It should not be used as the basis for any investment decision. The information provided does not fully describe the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Additionally, no guarantee is made regarding the accuracy of any statements, views, or forecasts provided in this article.

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