Morgan Stanley: Upgrades YOFC (06869) rating to "Hold", reiterates target price of HK$230.

Morgan Stanley released a research report stating that YOFC (06869) has dropped by about 50% since its peak in June 2026, but the profit growth trajectory supported by the AI-driven fiber optic super cycle has not changed. The bank believes that the valuation adjustment has created an extremely attractive buying opportunity, and has decided to upgrade its H-share rating from "in line with the market" to "overweight" to reflect the more attractive risk-return profile after the recent stock price correction, and maintain its target price of HK$230. The report points out that the performance pre-announcement released by Yangtze Optical Fibre And Cable Joint Stock on July 14 showed that its second quarter profit in 2026 is expected to reach RMB 1.9 to 2.5 billion, making the bank's forecast of RMB 7.5 billion in annual profit highly likely to be achieved. In addition, although the market was previously concerned about the supply risks brought about by new capacity expansion, the bank expects that the capacity expansion will take time, and the demand brought about by the flourishing AI infrastructure development is still strong, so the momentum of earnings growth in the next 6 to 12 months will not undergo substantial changes. Yangtze Optical Fibre And Cable Joint Stock is also a leader in next-generation technology innovation, successfully completing the world's first field trial of the Hollow Core Fiber (HCF) Wave Division Multiplexing (WDM) transmission system in June 2026, further establishing its technological leadership position. Morgan Stanley currently estimates that Yangtze Optical Fibre And Cable Joint Stock's net profit in 2026 and 2027 will reach RMB 7.507 billion and RMB 12.730 billion, respectively, which are 10% and 27% higher than market consensus forecasts, reflecting the bank's more optimistic view on its short-term earnings momentum.