UBS: Raising the target price of Changfei Optical Fiber Cable (06869) to HK$330, reaffirming the “buy” rating

The Zhitong Finance App learned that UBS released a research report stating that the target price of Changfei Optical Fiber Cable (06869) was raised by 14% from HK$290 to HK$330, reaffirming the “buy” rating. The bank also raised the company's profit forecast, raising the 2026-2028 profit forecast to 9.1 billion yuan, 15.6 billion yuan, and 19.1 billion yuan, mainly reflecting the better-than-expected optical fiber price performance driven by AI and the transformation of the product structure to high-performance optical fiber products.

UBS pointed out that given the company's sufficient prefabrication capacity and industry-leading technical strength, assuming that the unit production cost of optical fiber remains stable, the bank expects its gross margin to remain high at over 70%. The bank's profit forecast for Changfei Optical Fiber Cable 2027/2028 is 7%/19% higher than the agreed market forecast. Considering the tight supply of the industry and the optimization of the product structure, the bank expects its average selling price to remain at a high level after 2027.

Since the stock price peaked in June, the company's stock price has fallen 37% because investors are concerned that the expansion of optical fiber production capacity announced by peers and the new company may cause the company's profits to peak in 2027. However, UBS believes the risk of overcapacity is limited. First, with years of accumulated R&D investment, the company has an advantage over its Chinese peers in using high-performance optical fiber products to expand the global data center market; second, due to supply bottlenecks in key production equipment and customer verification processes, the production capacity expansion cycle of peers or new companies may be longer than expected.