UBS: Drastic reduction of the target price of Changfei Optical Fiber Cable (06869) to HK$180, reaffirming the “buy” rating

The Zhitong Finance App learned that UBS released a research report stating that it reaffirmed the “buy” rating of Changfei Optical Fiber Cable (06869, 601869.SH), but due to the general decline in global AI stock valuations and weak investor sentiment, the target price-earnings ratio ratio was lowered by 45.5% from HK$330 to HK$180, and the target price for A-shares was RMB 290.

The bank pointed out that revenue for the third quarter increased 139% year on year, 52% quarterly, gross profit increased 362% year on year and 44% quarter over quarter; net profit increased 32% quarterly to 3.2 billion yuan, 4% to 9% higher than the bank and market expectations. The gross margin was 57.4%, down 3 percentage points from quarter to quarter. It is expected that cable products account for a relatively high proportion. The bank believes that increasing the company's exposure to cable products is positive, helping to directly connect with customers and enhance value capture.

The bank also pointed out that global fiber prices have recently moved closer to China's level, reflecting demand driven by global data center construction and not just a Chinese phenomenon, which is beneficial to the sustainability of demand. China's G657.A1 fiber premium over US/Europe has narrowed to around 6%/19%.

The bank fine-tuned Changfei's profit forecast for 2026 to 2028 by 5% to 4%, and reduced the target price-earnings ratio for H shares in 2027 from 16 times to 9 times; the current price is only equivalent to forecasting the 2027 price-earnings ratio by about 5 times. The bank believes that the valuation is too stringent.