Yangtze Optical Fibre's 2Q26 earnings guidance beat expectations, and Nomura maintains a Buy rating

Overview

This report is Nomura's earnings review of Yangtze Optical Fibre 6869.HK. After the market close on July 14, 2026, the company released positive earnings guidance, indicating 1H26 earnings of RMB2.4bn to RMB3.0bn. Nomura believes this performance significantly exceeded expectations and reflects the full impact of optical fiber product price increases in the second quarter.

Core views

The core view is that Yangtze Optical Fibre's 2Q26 earnings significantly exceeded expectations, driven by constrained supply among major optical fiber and preform manufacturers, alongside rising demand from telecom operators and data communications, which pushed up product prices. Although the market is concerned about accelerating industry capacity expansion and competition from potential new entrants, leading to a notable recent share price correction, Nomura believes the strong earnings guidance will improve market sentiment and create short-term trading opportunities.

Analysis framework

The report uses earnings guidance breakdown, YoY growth comparison, valuation multiples, and a target price framework to assess the company's performance. Nomura breaks down the 1H26E earnings guidance into 2Q26E earnings and compares it with its own previous forecast, while supporting the target price with FY27F EPS and peer P/E valuation.

Methodology notes

• Valuation methodP/E multiple valuation

  23.7x FY27F EPS

  Nomura's target price of HKD266.00 is based on 23.7x FY27F EPS of RMB9.75, which is in line with the median P/E of WIND Hong Kong-listed cable companies.

• Earnings analysisEarnings guidance breakdown

  Deriving 2Q26E earnings from 1H26E guidance

  The company's 1H26E earnings guidance is RMB2.4bn to RMB3.0bn, implying 2Q26E earnings of about RMB1.9bn to RMB2.5bn, with a midpoint of about RMB2.2bn.

• Rating systemNomura Buy rating

  Outperform the Hang Seng Index

  Nomura's Buy rating indicates that the analyst expects the stock to outperform its benchmark index over the next 12 months; the stock's benchmark index is the Hang Seng Index.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 6869.HK

  Covered stock and primary recommended name

  Strengths

  Earnings guidance significantly exceeded expectations; optical fiber product price increases were fully reflected; constrained supply and rising demand support short-term earnings improvement; Buy rating and HKD266.00 target price maintained.

  Weaknesses

  The share price has fallen sharply recently, as the market is concerned about faster capacity expansion and intensifying competition from potential new entrants.

  Comparison

  The report uses the Hang Seng Index as the benchmark; over the past three weeks, Yangtze Optical Fibre fell 46% while the Hang Seng Index rose 2%. The valuation multiple references the median P/E of WIND Hong Kong-listed cable companies.

  Risks

  Telecom operator demand weaker than expected, weaker-than-expected expansion in AI networking business, and lower-than-expected overseas market expansion.

• 601869.SS

  The same company's A-share ticker, though the report's core coverage remains focused on 6869.HK

  Strengths

  Related to Yangtze Optical Fibre's fundamentals and affected by the logic of optical fiber product price increases and improving demand.

  Weaknesses

  The report does not provide a separate A-share rating, target price, or valuation.

  Comparison

  No independent A-share valuation comparison is provided.

  Risks

  Also faces risks of weaker-than-expected telecom demand, AI business, and overseas expansion.

Key data

• 1H26E earnings guidanceCNY2.4bn-3.0bnUp 711%-914% YoY.
• 2Q26E implied earningsCNY1.9bn-2.5bnUp 1222%-1639% YoY.
• 2Q26E earnings midpointCNY2.2bnSignificantly above Nomura's previous forecast of CNY1.0bn.
• Target priceHKD266.00Maintained unchanged.
• Closing priceHKD153.90Price date is 2026-07-14.
• Valuation basis23.7x FY27F EPS of CNY9.75In line with the median P/E of WIND Hong Kong-listed cable companies.
• Current valuation13.7x FY27F EPSThe report states that the current share price corresponds to 13.7x FY27F EPS.
• Recent share price performance-46%Yangtze Optical Fibre's share price fell 46% over the past three weeks, while the Hang Seng Index rose 2% over the same period.

Impact & implications

The report's implication is broadly positive: the earnings guidance reinforces the investment thesis of optical fiber price increases and tight supply-demand conditions, helping to ease market concerns about capacity expansion and intensifying competition. If demand and pricing trends continue, the current valuation still offers substantial upside relative to the target price; however, the sustainability of high earnings growth will still depend on demand recovery, penetration of high-end AI products, and the pace of overseas expansion.

Risks

• China telecom operators' demand for optical fiber is weaker than expected.
• Expansion of AI networking business is weaker than expected.
• Yangtze Optical Fibre's overseas market expansion is below expectations.
• Accelerating industry capacity expansion may intensify competition.
• Potential new entrants may put pressure on prices and profit margins.

What to watch

• Whether subsequent optical fiber product price increases can continue.
• The pace of recovery in telecom operator demand.
• Whether data communications and AI networking demand will continue to drive high-end products.
• The penetration progress of high-end AI products such as hollow-core optical fiber.
• Whether supply constraints among major optical fiber and preform manufacturers will ease.
• The pace of overseas market expansion and its earnings contribution.