UBS: YOFC (06869) reporting below market expectations for the quarter, but optimistic about future earnings growth over the next few quarters.

UBS released a research report stating that they will maintain their profit forecast and target price of HKD 290 for YOFC (06869), maintaining a "buy" rating. YOFC's first quarter performance fell short of market expectations, with revenue of 3.7 billion RMB, a 28% increase year on year; gross profit of 1.5 billion RMB, a 90% increase year on year; and net profit of 495 million RMB, a 226% increase compared to the same period last year. The bank expects that with continued optimization of product portfolio and gradual reflection of rising fiber optic prices in contract renewals, the gross profit margin will continue to improve in the coming quarters. The bank believes that YOFC's first quarter net profit of 495 million RMB is below market expectations of 800 million to 1 billion RMB, and expects a negative market reaction in the short term. However, the bank remains confident in the company's profit growth in the coming quarters, believing that the full reflection of fiber optic price increases requires time and with the continuous increase in demand for data centers, the company is expected to meet the bank's full-year forecast. YOFC's stock price opened 5.1% lower this morning, dropping to 196.1 RMB at one point, a decrease of 15%, and currently stands at 200.2 RMB, down 13.3%, with a trading volume of 6.969 billion RMB.