Key takeaway

Since 3Q25, fiber optic prices have continued to rise, and the industry has shifted from recovery to a phase of tight supply with both volume and price moving higher. In particular, incremental demand for products such as G.657 has been strong. The company is flexibly adjusting its product mix and increasing the share of G.657 capacity. In 1Q26, the company partially reflected the elasticity brought by fiber optic price hikes, but most orders in Q1 were still low-priced contracts from last year. Therefore, we expect profit to be better reflected in Q2 and Q3. In addition, State Grid's fixed-asset investment during the 15th Five-Year Plan period is expected to reach RMB4tr, representing a 40% increase over the 14th Five-Year Plan period. The company's power cables cover a full range from medium- and low-voltage to ultra-high-voltage products, positioning it to benefit.

Event

The company released its 2025 annual report and 1Q26 report. 2025 revenue was RMB9.451bn, up 6.78% YoY. Net profit attributable to shareholders of the parent company was -RMB299mn, down 316.64% YoY. Recurring net profit attributable to shareholders of the parent company was -RMB314mn, down 410.61% YoY. 1Q26 revenue was RMB2.202bn, up 11.12% YoY. Net profit attributable to shareholders of the parent company was RMB81mn, up 279.96% YoY.

Quick Take

1. After impairment provisions in 2025, the company starts with a clean slate and posted a sharp profit increase in 1Q26.

The company's 2025 revenue was RMB9.451bn, up 6.78% YoY. Net profit attributable to shareholders of the parent company was -RMB299mn, down 316.64% YoY. Recurring net profit attributable to shareholders of the parent company was -RMB314mn, down 410.61% YoY.

The sharp decline in net profit in 2025 was mainly because the company in 3Q25 booked a fixed-asset impairment provision of RMB264mn for Yongte Information, based on its assessment of the fiber optic cable market at the time, especially the sharp decline in the company's winning bid price from China Mobile in July 2025. Yongte Information was operating at a loss, and its assets showed signs of impairment. However, looking at the current situation, the fixed-asset impairment provision in 2025 has, to some extent, reduced the depreciation pressure on Yongte Information, helping the company start with a clean slate.

In 1Q26, the company's revenue was RMB2.202bn, up 11.12% YoY. Net profit attributable to shareholders of the parent company was RMB81mn, up 279.96% YoY. The main reason was that the subsidiary Yongte Information achieved higher fiber optic sales volume in Q1, and selling prices rose significantly, delivering strong efficiency gains.

2. Optical fiber prices have surged significantly, with export volume and price both rising.

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 avera ge 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 subst antial YoY increase. In addition, based on volume based procurement prices from various provincial subsidiaries of China Telecom, the ceiling price was essentially anchored at RMB2,500 per sheath kilometer ( tax exclusive, converted on a 24 core basis), whi le winning bids were generally close to the ceiling. The estimated fiber price exceeded RMB70 per core kilometer, also a significant increase compared to 2025. The sustained rise in China's optical fiber prices reflects improving demand and an overall tigh t supply. In March 2026, China exported 3,224.1 tonnes of optical fiber, up 19.6% YoY; the export value was RMB1.70bn, up 252.2% YoY; the unit price was RMB528,000 per tonne, up 194.6 % YoY, and up 152.7% compared to February. In terms of export volume, ass uming 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. We expect AI-driven demand for optical fiber to continue growing rapidly. First, global demand for transceivers will still increase substantially in 2026, and corresponding fiber demand will grow accordingly. Second, scale-up fiber demand may begin to emerge in 2027. Third, DCI will also generate significant demand. Currently, the optical fiber and cable industry has shifted from recovery to a phase of tight supply with both volume and price rising.

3. The company flexibly allocates production capacity, offering substantial profit elasticity.

The company has an integrated optical preform–optical fiber–optical cable industry chain. Its optical preform products include G.652 and G.657 series single-mode preforms. Its optical fiber products include G.652 and G.657 series single-mode fibers. Its optical cable products include standard cables such as GYTA, GYTS, and GYTA53; ribbon cables such as GYDTA and GYDXTW; and specialty cables such as ADSS cables, rodent-resistant cables, hybrid optical-electrical composite cables, fully dry cables, and air-blown micro cables. In response to varying demand conditions in the optical communications market, the company adjusts its product mix. For instance, with current strong market demand for G.657 products, the company is actively increasing the share of related optical fiber capacity. In 1Q26, the company partially reflected the elasticity brought by fiber optic price hikes, but most orders in Q1 were still low-priced contracts from last year. Therefore, we expect profit to be better reflected in Q2 and Q3.

4. Power cables cover a full range of products from medium/low voltage to ultra-high voltage, benefiting from increased capital expenditure by State Grid.

During the 15th Five-Year Plan period, State Grid's fixed-asset investment is expected to reach RMB4tn, a 40% increase over the 14th Five-Year Plan period, to drive the high-quality development of the new power system industry and supply chains through expanded effective investment. State Grid will preliminarily establish a new power grid platform with coordinated main, distribution, and micro grids, further consolidating the "west-to-east power transmission, north-to-south power supply" energy delivery network; it will accelerate the construction of ultra-high voltage direct current transmission corridors, promoting an increase in cross-regional and cross-provincial transmission capacity of over 30% compared to the end of the 14th Five-Year Plan period. Since 2026, State Grid Corporation of China has adhered to moderately proactive power development, actively expanding effective investment and fully leveraging the grid's foundational support and investment-driving role. In the first quarter, State Grid completed fixed-asset investment of over RMB129bn, a YoY increase of 37%, driving upstream and downstream investment across the industrial chain of over RMB250bn. Power cables are the company's main products, specifically including 500kV, 220kV, 110kV, and 66kV high-voltage and ultra-high voltage cross-linked power cables, 35kV and below medium/low voltage cross-linked power cables, and specialty cables such as rail transit cables, wind power cables, photovoltaic cables, and fire-resistant cables. The company is a major supplier of high-voltage and ultra-high voltage power cables and ultra-high voltage conductors to State Grid and China Southern Power Grid; conductor products specifically include steel-cored aluminum strands, aluminum alloy conductors, aluminum-clad steel conductors, and other varieties, covering the full range of 1100kV, 1000kV, 800kV and below ultra-high voltage and high-voltage conductor products. The company is poised to benefit from State Grid's intensified construction of ultra-high voltage infrastructure.

5. Earnings forecast and investment recommendation.

Since 3Q25, fiber optic prices have continued to rise, and the industry has shifted from recovery to a phase of tight supply with both volume and price moving higher. In particular, incremental demand for products such as G.657 has been strong. The company is flexibly adjusting its product mix and increasing the share of G.657 capacity. In 1Q26, the company partially reflected the elasticity brought by fiber optic price hikes, but most orders in Q1 were still low-priced contracts from last year. Therefore, we expect profit to be better reflected in Q2 and Q3. Furthermore, during the 15th Five-Year Plan period, State Grid's fixed-asset investment is expected to reach RMB4tn, a 40% increase over the 14th Five-Year Plan period. The company's power cables cover a full range of products from medium/low voltage to ultra-high voltage, positioning it to benefit directly. We forecast net profit attributable to shareholders of the parent company at RMB1.512bn, RMB2.415bn, and RMB2.953bn for 2026–2028, corresponding to PE multiples of 14x, 9x, and 7x, respectively. We initiate with buy rating.

6. 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. If the price of G657.A2 optical fiber declines by 5%, 10%, or 15% in 2026, the company's gross margin would decrease by 0.51pct, 1.03pct, and 1.56pct, respectively, while net profit attributable to shareholders of the parent company would decline by RMB67mn, RMB134mn, and RMB202mn. The company's copper foil business expansion falls short of expectations, and intensifying competition reduces the gross margin of its cable business.