Nomura maintains Buy on YOFC and highlights accelerating industry capacity expansion
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Nomura maintains Buy on YOFC and highlights accelerating industry capacity expansion
The report says that optical fiber preform projects by new entrants such as Han's Laser and Hoshine Silicon Industry reflect strong AIDC-driven demand. YOFC still benefits in the short term from supply constraints and high spot prices, but medium-term competitive pressure from new high-end fiber capacity warrants attention.
- Han's Laser plans to invest no more than CNY2.52bn in Zhangjiagang, Jiangsu, to build a project with annual capacity of 2,000 tons of optical fiber preforms and synthetic quartz, equivalent to about 60 million fkm of optical fiber.
- Hoshine Silicon Industry plans to enter the optical fiber industry with a target annual capacity of 3,200 tons of optical fiber preforms; the project received government approval on June 8.
- Nomura believes optical fiber demand is mainly driven by the rollout of AIDC infrastructure. Near-term supply constraints are likely to persist, and YOFC is expected to continue benefiting from high spot prices and margin expansion driven by AIDC exposure.
- If new entrants successfully develop high-end products such as hollow-core fiber and multi-core fiber and smoothly execute capacity expansion, margin expansion for incumbent leaders such as YOFC may come under pressure.
Report interpretation
Overview
This is a Nomura company research quick note on YOFC (6869.HK), focusing on signs of capacity expansion in China's optical fiber industry. Using recently disclosed optical fiber preform projects by Han's Laser and Hoshine Silicon Industry as entry points, the report concludes that new entrants are accelerating their布局 in the optical fiber market, mainly driven by stronger demand from AIDC infrastructure construction.
Core views
Nomura maintains its Buy rating and HKD266 target price on YOFC. In the short term, technical barriers in optical fiber preforms remain high, and the market is still dominated by incumbents such as Corning, Fujikura, and YOFC, so supply constraints may continue to support YOFC's spot prices and margins. In the medium term, if new entrants such as Han's Laser and Hoshine Silicon Industry can achieve breakthroughs in high-end products such as hollow-core fiber and multi-core fiber and deliver on their expansion plans, industry competition may intensify and YOFC's margin expansion could come under pressure.
Analysis framework
The report combines event-driven analysis with industry supply-demand analysis: it first reviews new entrants' optical fiber preform expansion plans and investment scale, then assesses how these plans affect AIDC-driven optical fiber demand, near-term supply constraints, technical barriers, and YOFC's competitive landscape. For valuation, it uses FY27F EPS and the median P/E of Hong Kong-listed cable companies as the basis for the target price.
Methodology notes
23.7x FY27F EPS
YOFC's HKD266.00 target price is based on 23.7x rolled-forward FY27F EPS of CNY9.75, in line with the median P/E multiple of WIND Hong Kong-listed cable companies.
AIDC-driven optical fiber demand and new capacity entry
Through new optical fiber preform projects by Han's Laser and Hoshine Silicon Industry, the report infers strong industry demand while also evaluating the potential impact of new supply on incumbents' pricing and margins.
Optical fiber preforms, high-end hollow-core fiber, and multi-core fiber
Nomura believes the optical fiber preform segment has high technical barriers and is dominated by incumbents in the short term; however, if new entrants break through in high-end products and achieve mass production, industry competition will become more intense.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- YOFC (6869.HK)The core company covered in the report; Nomura maintains a Buy rating and HKD266 target price.
- Strengths
- One of the incumbent leaders in optical fiber preforms, benefiting from near-term supply constraints, AIDC demand, and elevated spot prices.
- Weaknesses
- Margin expansion depends on supply constraints and demand for high-end AI networking.
- Comparison
- Alongside Corning and Fujikura, it is one of the current incumbent leaders in optical fiber preforms; compared with new entrants such as Han's Laser and Hoshine Silicon Industry, it has first-mover and technical-barrier advantages.
- Risks
- If new entrants successfully develop hollow-core fiber and multi-core fiber and execute capacity expansion plans, competition may intensify and squeeze margins.
- Han’s Laser (002008 CH)A new entrant into the optical fiber market, having announced a Zhangjiagang optical fiber preform and synthetic quartz project and a proposed acquisition of a 51% stake in Linfiber.
- Strengths
- Large planned investment scale and access to high-end hollow-core fiber technology through Linfiber.
- Weaknesses
- Still a new entrant relative to incumbent optical fiber preform leaders, with execution uncertainty around project delivery and mass production of high-end products.
- Comparison
- Its expansion plans reflect strong industry demand, but it could also become a source of future competitive pressure for YOFC.
- Risks
- There is uncertainty around expansion progress, technology conversion, and commercialization of high-end products.
- Hoshine (603260 CH)A new entrant into the optical fiber market, planning annual capacity of 3,200 tons of optical fiber preforms.
- Strengths
- Large planned capacity scale, and the project has received government approval.
- Weaknesses
- The report does not provide its existing operating foundation in the optical fiber field; as a new entrant, it must overcome technical barriers.
- Comparison
- Together with Han's Laser, it reflects accelerating industry expansion; compared with incumbents such as YOFC, its competitiveness still depends on production ramp-up and product quality.
- Risks
- Project execution, technical capability, and market competition may all affect actual supply release.
- Corning (GLW US)One of the incumbent leaders in optical fiber preforms mentioned in the report; unrated.
- Strengths
- Listed as a current industry leader, indicating technical-barrier advantages.
- Weaknesses
- The report does not elaborate on company-level risks or valuation.
- Comparison
- Represents the incumbent camp together with Fujikura and YOFC.
- Risks
- Breakthroughs by new entrants in high-end products could alter the competitive landscape.
- Fujikura (5803 JP)One of the incumbent leaders in optical fiber preforms mentioned in the report, rated Buy.
- Strengths
- Listed as an industry leader with technical barriers.
- Weaknesses
- The report does not provide detailed company-level financial or operating analysis.
- Comparison
- Together with Corning and YOFC, it forms the incumbent leader benchmark group.
- Risks
- New high-end industry capacity may create medium-term competitive pressure.
Key data
- YOFC target priceHKD266.00Based on 23.7x rolled-forward FY27F EPS of CNY9.75.
- YOFC ratingBuyNomura maintains a Buy rating.
- Han's Laser optical fiber project investmentNo more than CNY2.52bnThe project is located in Zhangjiagang, Jiangsu, and will be built in two phases: CNY1.52bn for phase one and CNY1bn for phase two.
- Han's Laser planned capacityAnnual capacity of 2,000 tons of optical fiber preforms and synthetic quartz, equivalent to about 60 million fkm of optical fiberThe company announced the investment plan on June 25.
- Han's Laser acquisition of Linfiber stakeCNY306mn for a 51% stakeLinfiber (Nantong) has high-end hollow-core fiber technology suitable for large-scale AI networks.
- Hoshine Silicon Industry planned capacityAnnual capacity of 3,200 tons of optical fiber preformsThe company said the project received government approval on June 8.
- Valuation benchmarkHang Seng IndexThe report states that the stock's benchmark index is the Hang Seng Index.
- Report production time2026-06-26 14:09 UTCDisclosed in the main body of the report.
Impact & implications
For YOFC, AIDC-driven optical fiber demand and near-term supply constraints provide positive support and may sustain high spot prices and margin expansion. However, these capacity expansion projects indicate rising industry attractiveness; if new entrants overcome technical barriers and commence production smoothly, YOFC's competitive advantage and room for margin expansion may be weakened.
Risks
- Chinese telecom operators' optical fiber demand may be weaker than expected.
- Expansion of AI networking business may be weaker than expected.
- YOFC's overseas market expansion may fall short of expectations.
- New entrants may successfully develop high-end products such as hollow-core fiber and multi-core fiber and smoothly expand capacity, leading to intensified industry competition.
- The target price may not be achieved due to the overall market, macro trends, and company earnings coming in below estimates.
What to watch
- Construction progress and actual production ramp-up pace of the two phases of Han's Laser's Zhangjiagang project.
- Post-approval progress and capacity release of Hoshine Silicon Industry's 3,200-ton annual optical fiber preform project.
- Progress in large-scale application of Linfiber's hollow-core fiber technology in AI networks.
- The sustainability of optical fiber demand driven by AIDC infrastructure construction.
- Changes in YOFC's spot prices, share of AIDC-related revenue, and margins.
- The pace of demand recovery from Chinese telecom operators.
- Progress in YOFC's overseas market expansion.