EB SECURITIES: AI inflation is giving birth to a new cycle, and the price increase of optical fiber and copper-clad laminate is driving the growth of industry companies.

EB SECURITIES released a research report stating that since early 2026, the price of Optical Cable Corporation's fiber optics has been continuously rising significantly. Currently, the transaction prices in the collective procurement market of Optical Cable Corporation are showing a rapid upward trend. The demand for fiber optics in AI data centers far exceeds that of traditional data centers, and the competition among top cloud vendors in AI is driving the demand for fiber optics. Against the backdrop of the continuous price increase of Optical Cable Corporation's fiber optics, companies in the industry such as YOFC (06869) may see a sustained increase in performance. On the other hand, affected by the increase in upstream raw material prices, leading companies in the domestic and international cover copper plate (CCL) industry have successively announced price increases. Companies like KB LAMINATES have undergone multiple rounds of price adjustments in the past 25 years, reaffirming their recommended logic. EB SECURITIES' key points are as follows: Event: The price of Optical Cable Corporation's fiber optics has been rising significantly since early 2026, and the transaction price of Optical Cable Corporation in operator collective procurement continues to rise According to data from "Optical Fiber Online," as of March 4, prices of various types of fiber optics have exceeded expectations. The price of G.652.D single-mode fiber optics has risen from 18 RMB/core-km before New Year's to 85-120 RMB/core-km, while the price of G.657.A2 has risen from 35 RMB/core-km to 210-230 RMB/core-km. Due to the continuous rise in the price of Optical Cable Corporation's fiber optics, suppliers faced with operator collective procurement projects with maximum response limits and market quotations inverted have shown insufficient bidding intentions, leading to the failure of multiple projects. From successful collective procurement cases, the current transaction prices in the collective procurement market of Optical Cable Corporation's fiber optics are showing a rapid upward trend: in March 26, Chongqing Telecom introduced an emergency procurement project for Optical Cable Corporation, which involved the highest response limit price for the insulation cable unit price (excluding tax) of "medium-shaped introduction of Optical Cable Corporation-GJYXFCH-single-mode G.657A21B6a2)-1 core." This price has undergone two rounds of price increases, significantly increasing to 350 RMB/km, ultimately resulting in a successful procurement. The winning bid prices were 268 RMB/km (60% share for the first successful candidate, Zhongyatai Communication) and 323 RMB/km (40% share for the second successful candidate, Hengtong Optic-Electric). The price increase of Optical Cable Corporation's fiber optics is due to the combined effect of "AI construction demand," "shortage of raw materials for fiber rods," and "demand for fiber optics in drones." 1) The demand for high-end fiber optics is driven by AI data centers' high-speed transmission needs. The demand for fiber optics in AI data centers far exceeds that of traditional data centers, and the competition among top cloud vendors in AI is driving the high demand for fiber optics. The usage of GPU clusters by companies like Beijing Vastdata Technology and high-speed connections for AI-based data centers requires approximately 36 times more fiber optics than traditional CPU racks; nodes equipped with 72 GPUs (such as NVIDIA Corporation's Blackwell) require 16 times more fiber optics than traditional cloud switches. Data centers' consumption of fiber optics is rapidly increasing. According to CRU forecasts, global data centers' demand for fiber optics in 2025 is 69.6 million core-km and is expected to increase to 127.6 million core-km by 2030. 2) The supply and demand for prefabricated fiber rods is tight, and the production expansion cycle is long. Currently, leading Chinese fiber optic companies' prefabricated fiber production lines are running at full capacity. In addition to the high investment, high technological barriers, and long approval processes required for producing prefabricated fiber rods, the production expansion cycle is relatively long (typically 1.5-2 years). Therefore, fiber optics prices are expected to remain high in the short term. Furthermore, in order to meet the demand for high-end products, some manufacturers are shifting production resources towards high-specification, high-profit fiber optics (such as G.657.A2), leading to an increase in prices for ordinary single-mode fiber optics such as G.652.D. 3) Drones also contribute to some demand. Compared to traditional RF drones, fiber optic drones offer advantages such as interference-resistant communication, high bandwidth and low latency, high security, and extended endurance. A single drone equipped with 10-40km bend-resistant fiber (G.657.A2) further increases the demand for fiber optics and raises fiber optics prices. Overseas companies in the fiber optics industry chain are actively responding to the market growth brought by AI data centers, and their stock prices are entering an upward trend. Since the beginning of the year until March 11, Corning Inc, Furukawa Electric Industry, Sumitomo Electric Industries, and Fujikura's stock prices have risen by 50.8%, 197.2%, 69.4%, and 47.1%, respectively. The recent orders and production expansions by these companies are sending positive signals to the market: 1) On January 27, 2026, Corning Inc reached a high-value $6 billion fiber optic supply agreement with Meta to support Meta's data center construction plan, leading Corning Inc to significantly expand its manufacturing capacity at its Optic Cable Corporation manufacturing plant in Hickory. In addition, Corning Inc's CEO revealed in an interview with CNBC that Meta's Hyperion data center in Louisiana alone requires 8 million miles of fiber optics. 2) In his New Year address, the president of Sumitomo Electric Industries clearly stated that the company's strategic goal is to expand the production scale of fiber optics and optical components for the surging demand for data centers. 3) North American telecom giants AT&T and Verizon are actively deploying a new fiber optic network for the AI era. AT&T announced a five-year investment plan on March 10, planning to invest over $250 billion in the US to expand high-speed fiber optics and wireless network coverage. Meanwhile, Verizon signed an agreement with Amazon Web Services to build high-capacity fiber optic lines connecting to AWS data centers. Against the backdrop of the continuous price increase of Optical Cable Corporation's fiber optics, companies in the fiber optics industry have the potential for sustained performance improvement. YOFC (06869) as a global leader in fiber optics, has large-scale production capabilities for fiber rods and cables. Its performance is expected to benefit from the current trend of rising fiber optics prices, and it is advisable to continue monitoring the company. Additionally, it is recommended to keep an eye on leading companies in the fiber optics industry in the US and Japan: Corning Inc (GLW.US), Furukawa Electric Industry, Sumitomo Electric Industries, and Fujikura. Event: Continuation of a price increase in cover copper plates due to the impact of rising upstream raw material prices In recent times, leading companies in the domestic and international cover copper plate (CCL) industry have successively announced price increases: in the overseas market, the Japanese semiconductor materials giant Resonac raised the prices of CCL and adhesive films by 30% starting from March 1; Mitsubishi Gas Chemical, a major Japanese electronic materials company, announced price increases for electronic materials products, including CCL, Prepreg, and CRS, with an increase of 30%, effective April 1, 2026. In the domestic market, on March 10, KINGBOARD HLDG announced a price increase, with a 10% increase in all thickness specifications of products such as plates, PP (semi-cured sheets), and copper foil processing fees, starting from the day of receiving orders. Since 2025, leading cover copper plate manufacturers such as KB LAMINATES have undergone multiple rounds of price increases. This is mainly due to the sharp rise and tight supply of prices for chemical products such as epoxy resin, natural gas, TBBA, as well as the continuous rise in electronic cloth prices and the long-term high copper prices, leading to a steep increase in raw material and processing costs for cover copper plates. Reaffirming the recommended logic for KB LAMINATES: Strong supply chain stability and cost control capabilities, the logic of "profit elasticity release" gradually materializing By building a complete vertical integrated industrial chain, producing core raw materials such as fiberglass yarn, fiberglass cloth, and copper foil internally, and benefiting from bargaining advantages brought by diverse downstream customers, the company possesses strong supply chain stability and cost control capabilities. EB SECURITIES believes that the company's continuous and smooth price increases will directly increase gross profit margins, and the logic of "profit elasticity release" is gradually being realized. Recommendation: KB LAMINATES (01888). Keep an eye on leading companies in the cover copper plate industry: Taiwan's Unimicron, Shengyi Technology (600183.SH), Nanya New Material Technology (688519.SH), and Zhejiang Wazam New Materials (603186.SH). Risk Warning Unexpectedly hawkish Federal Reserve policies, AI technology iterations falling short of expectations, fiber optics demand falling short of expectations, cover copper plate demand falling short of expectations, significant market sentiment downturn, company performance realization falling short of expectations.