Zhongtian Tech Secures Major Domestic AIDC Order; High-Spec Fiber Demand and Price Hike Logic Validated

Overview

Morgan Stanley issued a research note confirming that Jiangsu Zhongtian Technology (600522.SS) recently secured a large order from a major domestic Artificial Intelligence Data Center (AIDC) client, marking the transition of AI-driven fiber demand from expectation to realization. The report notes that this order is not only substantial in scale (accounting for over a quarter of the company's 2025 fiber optic cable business) but, more importantly, signifies a significant shift in product mix: high-specification, high-unit-price G.657A1 fiber has become the mainstay. Combined with CRU data showing a rapid rise in spot prices, the report expects this order to deliver higher margins and reiterates its 'Overweight' rating on Zhongtian Tech with a target price of Rmb53.23.

Core views

Core View 1: AIDC demand confirmed; order scale exceeds expectations. Zhongtian Tech announced an order worth Rmb1.34bn (ex-VAT) from a major domestic hyperscaler, with deliveries expected to begin in June 2026 over an execution period of approximately one year. According to the report's estimates, this contract value represents roughly 18% of Zhongtian Tech's Optical Information segment revenue, or 25-27% of its 2025 fiber and cable business revenue, providing a significant boost to short-term performance. Core View 2: Product mix upgrade; share of high-margin varieties increases. Total demand in this tender was approximately 13-14 million fiber-kilometers, of which about 70% was G.657A1 fiber, 20% was G.652D fiber, and the remainder was a small amount of multimode fiber. This ratio differs markedly from traditional telecom network construction, reflecting strong demand for high-performance bend-insensitive fiber (G.657 series) due to high-density cabling within AI data centers. Given relatively constrained capacity and slightly higher technical barriers for G.657A1, its pricing power is far superior to standard G.652D fiber. Core View 3: Upward price trend established; earnings elasticity emerges. According to CRU data, as of end-May 2026, the spot price (ex-tax) of G.657A1 fiber in the Chinese market had risen to Rmb123.9/km, while standard G.652D was priced at Rmb81.9/km. By comparison, at end-January 2026, G.657A1 prices were at lows or unquoted, and G.652D was only Rmb31.5/km; at end-November 2025, they were unquoted and Rmb17.6/km respectively. The rapid price rebound, coupled with a higher share of high-spec products, leads the report to expect this order to carry higher margins than traditional telecom fiber orders.

Analysis framework

The report employs an 'event-driven + volume-price decomposition' analytical framework. First, it validates the prior hypothesis regarding AI data center-driven fiber demand by confirming a specific large-scale order (Event). Second, it deeply analyzes the order's product mix, highlighting the critical detail that G.657A1 accounts for 70%, thereby transforming a simple 'volume growth' narrative into a 'qualitative change' logic. Finally, it incorporates spot price benchmarks from the authoritative third-party CRU, quantitatively demonstrating the potential for gross margin improvement by comparing price differentials across fiber specifications and historical trends. This approach—moving from macro narratives down to micro order structures, validated by high-frequency price data—enhances the credibility of the conclusions.

Methodology notes

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition Analysis

  Rather than focusing solely on total revenue growth, the report decomposes revenue into 'volume' and 'unit price/product mix.' By highlighting that G.657A1 (high-price product) accounts for 70% versus G.652D (low-price product) at 20%, it demonstrates that even if total length remains unchanged, revenue structure and profits can improve significantly due to product mix optimization. This is a key method for analyzing inflection points in manufacturing cycles.

• Valuation MethodologyDCF Discounted Cash Flow

  DCF Model

  The report uses a DCF model for valuation, covering long-term cash flows from 2027-2037. Key assumptions include a WACC of 9.67% (cost of equity 10.55%, Beta 1.2) and a terminal growth rate of 2%. This method focuses on the company's ability to generate free cash flow over the long term and is suitable for evaluating infrastructure-type companies with stable growth expectations.

• Industry/Sector Analysis Framework

  Supply-Demand Mismatch Driven by Technological Iteration

  The report implies an industry norm: high-density interconnection in AI data centers requires higher-performance fiber (e.g., G.657), and capacity expansion for such high-end products typically lags behind low-end standard products (G.652D). This structural supply-demand mismatch is the core reason for resilient or rising prices of high-end products and a key area for investors seeking alpha.

Asset mapping & comparison

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

• Jiangsu Zhongtian Technology (600522.SS)

  Direct beneficiary; secured large high-margin order

  Strengths

  Possesses capacity and technological advantages in high-spec G.657A1 fiber; successfully integrated into the supply chain of top domestic AIDC clients

  Comparison

  Compared to manufacturers relying solely on traditional G.652D products, Zhongtian Tech benefits from premium pricing power driven by product mix upgrades

  Risks

  If subsequent overseas submarine cable orders fall short or domestic fiber price competition intensifies, some positives may be offset

Key data

• New Order ValueRmb1.34bn (ex-tax) / Rmb1.518bn (inc-tax)From a major domestic AIDC client; delivery starts June 2026
• Order Revenue Share~18% (Optical Information Segment) / 25-27% (2025 Fiber Optic Cable Business)Indicates significant contribution to short-term performance
• Total Demand Scale13-14 Million Fiber-KilometersClient's annual procurement volume; Zhongtian Tech won a portion
• Product Mix~70% G.657A1, ~20% G.652DHigh-spec G.657A1 dominates, distinct from traditional telecom networks
• G.657A1 Spot PriceRmb123.9/km (End-May 2026)Ex-tax; sharp increase from unquoted/lows at end-Jan
• G.652D Spot PriceRmb81.9/km (End-May 2026)Ex-tax; up from Rmb31.5/km at end-Jan
• Target PriceRmb53.23Implies 16% upside; based on DCF model

Impact & implications

For Zhongtian Tech, this order confirms its position in the AI computing infrastructure supply chain, particularly its capability to supply high-value-added fiber products. This helps alleviate market concerns about sluggish growth in its traditional telecom business and could re-rate its valuation. For the industry, this signals a structural shift from 'traditional telecom-driven' to 'AI data center-driven' demand; shortages and price hikes for high-spec fiber may become the new normal, benefiting leading manufacturers with high-end capacity. Furthermore, the rapid recovery in price indices suggests a restoration of industry profitability in Q2 and H2.

Risks

• Revenue growth in Optical Information and Telecom segments below expectations
• Weak order intake in overseas markets (especially Europe) for submarine cables
• Operational cost control less effective than expected

What to watch

• Follow-on orders from AIDC clients and their sustainability
• Monthly spot price trends for G.657A1 and G.652D fiber
• Gross margin changes in the fiber business in the interim report
• Tender progress for overseas offshore wind projects