UBS: Yangtze Optical Fibre and Cable (601869) 1Q26 Results: Fibre Price Upside Takes Time to Flow Through
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UBS observes that Yangtze Optical Fibre and Cable (YOFC) reported 1Q26 revenue of RMB 2.85 billion, representing 8% year-over-year growth but falling slightly below expectations. Gross margin declined by 3.5 percentage points year-over-year to 22.5%, primarily because fibre prices remained down approximately 5% annually and fiber preform depreciation costs increased. The anticipated recovery in fibre pricing has not yet fully translated into profitability, as carrier procurement price negotiations remain ongoing. The company maintains its full-year revenue growth guidance of 10% to 15%, though UBS believes margin improvement will likely be delayed until 2H26.
The upcoming China Mobile procurement results represent a crucial catalyst; UBS estimates that a 10% increase in procurement prices could boost YOFC's net profit by approximately 15%. International operations showed strength, with overseas revenue growing 12% to constitute 38% of total revenue, though associated margins faced pressure from currency fluctuations. To reflect the slower-than-expected margin recovery, UBS revised its 2026 EPS forecast downward to RMB 1.95. With the stock trading at RMB 32, it trades at roughly 18 times 2026 estimated earnings, a discount to its historical average. UBS maintains a Buy rating and a target price of RMB 35.
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