Key takeaway

The company maintained stable operations in 2025, and the gross margin of its core businesses improved steadily. In 1Q26, supported by rising demand and prices in the optical communication market, increased delivery of marine communication and energy products, and stronger overseas demand, both revenue and profit grew significantly. Since 2026, the optical fiber market has seen both volume and price increases. The company is expanding into new products such as hollow-core optical fiber, multi-core optical fiber, and MPO, and is expected to become an integrated cable provider in the AI era. In addition, the company holds abundant orders in marine energy and communication businesses, laying the foundation for subsequent growth.

Event

The company released its 2025 annual report and 1Q26 report. In 2025, operating revenue reached RMB66.855bn, up 11.45% YoY; net profit attributable to shareholders of the parent company was RMB2.68bn, down 3.20% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items was RMB2.565bn, down 0.43% YoY. In 1Q26, operating revenue reached RMB17.791bn, up 34.09% YoY; net profit attributable to shareholders of the parent company was RMB1.105bn, up 98.53% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items was RMB1.133bn, up 107.68% YoY.

Quick Take

1. Prosperity improves in optical communication and marine energy communication businesses, and revenue and profit surged in 1Q26. In 2025, operating revenue reached RMB66.855bn, up 11.45% YoY; net profit attributable to shareholders of the parent company was RMB2.68bn, down 3.20% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items was RMB2.565bn, down 0.43% YoY. In 2025, gross margin was 12.46%, down 0.75pct YoY; net margin was 4.26%, down 0.69pct YoY. Gross margins of the company’s opticalcommunication, smart grid, and marine energy and communication businesses all improved steadily. The overall decline in gross margin was due to the expansion of revenue from the low-margin copper product business. In 1Q26, operating revenue reached RMB17.791bn, up 34.09% YoY; net profit attributable to shareholders of the parent company was RMB1.105bn, up 98.53% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items was RMB1.133bn, up 107.68% YoY. The significant growth in revenue and profit in 1Q26 was mainly driven by rising demand and prices in the optical communication market, increased delivery of marine communication and energy products, and stronger overseas market demand.

2. The optical fiber industry enters an upcycle, and the company expands into new products such as hollow-core optical fiber, multi-core optical fiber, and MPO. According to Optic Communication data, in 1Q26, domestic G.652.D optical fiber prices rose strongly. After the Chinese New Year, fiber prices exhibited sharp fluctuations, at times changing on a daily basis. In 4Q25, the average tax-inclusive price of G.652.D optical fiber was RMB25 per core-kilometer, with a peak of RMB27 per core-kilometer. In 1Q26, the average tax-inclusive price reached RMB80 per core-kilometer, with a peak of RMB105 per core-kilometer, representing a substantial YoY increase. In addition, judging from the centralized procurement prices of China Telecom’s provincial subsidiaries, the price ceiling is generally anchored at RMB2,500 per sheath-km, based on a 24-core conversion, while winning bid prices are largely close to the ceiling. We estimate that optical fiber prices exceed RMB70 per core-km, also representing a significant increase from 2025. From the export perspective, in March 2026 China exported 3,224.1 tons of optical fiber, up 19.6% YoY; the export value reached RMB1.70bn, up 252.2% YoY; the unit price was RMB0.528mn/ton, up 194.6% YoY and up 152.7% from February. In terms of export volume, assuming 150g of fiber per kilometer (accounting for spool weight), March fiber exports are estimated to have exceeded 20mn core-kilometers, with the export share likely surpassing 65% of domestic production capacity. Strong overseas demand and robust export performance reflect the vigorous demand in the global optical fiber and cable market. The company is expanding into new products such as hollow-core optical fiber, multi-core optical fiber, and MPO, aiming to become a comprehensive cable provider in the AI era. The company continues to accelerate upgrades and iteration in optical communication technology and optimize its product and business structure, advancing R&D in ultra? low? loss optical fiber, submarine optical fiber, power? transmission optical fiber, large? bandwidth multimode optical fiber, few? mode optical fiber, multi? core optical fiber, and hollowcore optical fiber. The attenuation level of G.654.E optical fiber is industry? leading and has been widely applied in telecom operators and high? speed railway communication network projects; Hengtong OM4 and OM5 multimode optical fibers have been widely applied in large and medium? sized data center projects and can support high? performance multimode high? speed connections in data centers. In the optical fiber cabling field, the company has developed a series of products such as high? density MPO optical cables and MPO optical cable assemblies, which can meet the network interconnection needs within highperformance data centers. The products are used in data centers of Huawei, Alibaba, and others. In the hollowcore optical fiber field, the company jointly deployed with CHINA UNICOM, successfully launching and putting into operation CHINA UNICOM’s first commercial hollow? core optical fiber cable line.

3. Breakthrough in 500kV DC submarine cables: Cross? ocean submarine cable communication network projects continue to secure bids. The Beijing wind energy declaration 2.0 released at the 2025 Beijing Wind Energy Conference proposed that during the 15th Five? Year Plan period, China’s annual newly installed offshore wind power capacity will 15mn kW, with the average annual installations significantly higher than during the 14th Five? Year Plan period. Since 2025, the company has continuously won bids for domestic and overseas marine energy projects, with sufficient orders on hand. It has successively won bids for offshore wind power projects including the Middle Eas t submarine cable project, the Pengbo oilfield cluster shore power application project, the Guangxi Weizhou Island cross? sea interconnection project, the Wenzhou Dongtou Changqing project, the Guangxi Qinzhou offshore wind power demonstration project, and the Zhanjiang Xuwen East III offshore wind power demonstration project. In 2025, the company achieved full product coverage and full market coverage in the submarine cable market. In addition to offshore wind power and offshore oil and gas sectors, it also secured bids and achieved performance breakthroughs in full? series offshore photovoltaic products and the CNOOC dynamic cable system, and obtained China’s first high? voltage large? cross? section deep? water copper? wire armored submarine cable project. In 2025, the Liaoning Dandong Donggang Phase I 1GW offshore wind power project won by the company is a landmark project in China’s offshore wind sector. It is the country’s first million? kilowatt deep and far offshore wind project using ±500kV DC export cables and 66kV aluminum? core array cables. Offshore wind power development is moving toward deeper and farther seas and larger turbine units. The company plans to invest in the construction of a 17,000T deep and far offshore cable? laying vessel project; it is also accelerating the advancement of integrated marine system engineering capabilities and actively supporting offshore wind project development. In marine communications, the company continues to deepen its presence in the construction of global transoceanic submarine cable communication networks. It has won bids for projects including AKSCS in the Caspian Sea, NaSCOM2 (Maldives), PASELA (Indonesia), and Matrix Cable System (MCS-2). In addition, the PEACE transoceanic submarine cable communication system project invested in by the company continues to operate stably. It keeps providing high? speed and stable international communication bandwidth to customers across Asia, Africa, and Europe along the route, supporting the improvement of communication infrastruc ture and the development of telecommunications in these countries. As emerging digital industries such as artificial intelligence, data centers, and large models expand and develop, PEACE will also provide high? quality international communication links to a growing number of industry clients. As of the end of 2025, the company had orders in hand exceeding USD300mn.

4. Earnings forecast and investment recommendation. The company maintained stable operations in 2025, and the gross margin of its core businesse s improved steadily. In 1Q26, supported by rising demand and prices in the optical communication market, increased delivery of marine communication and energy products, and stronger overseas demand, both revenue and profit grew significantly. Since 2026, the optical fiber market has seen both volume and price increases. The company is expanding into new products such as hollow-core optical fiber, multi-core optical fiber, and MPO, and is expected to become an integrated cable provider in the AI era. In addi tion, the company holds abundant orders in marine energy and communication businesses, laying the foundation for subsequent growth. We expect the company to achieve net profit attributable to shareholders of the parent company of RMB8.252bn, RMB10.804bn, and RMB12.444bn in 2026–2028, corresponding to PE of 20X, 15X, and 13X. We assign a “Buy” rating.

5. Risks:

Optical fiber prices may rise less than expected. Since 3Q25, optical fiber prices in the China market have continued to rise. If subsequent optical fiber price increases fall short of expectations, this will affect the performance of related companies. Risk of faster-than-expected capacity expansion. If certain manufacturers expand capacity for optical fiber preforms and optical fiber cable products at a rapid pace, market supply may increase quickly, potentially leading to a supply-demand imbalance. Optical fiber companies may face US sanctions during the process of breaking into North American customers. Offshore wind development may fall short of expectations. In some regions, there may be gaps between planned capacity and actual implementation as well as the pace of execution; regulation is relatively strict in eastern Guangdong, and project approvals may slow. Competition in offshore wind may intensify as domestic demand remains strong and new entrants continue to emerge, potentially intensifying competition in the low? end submarine cable market.