EB SECURITIES: YOFC (06869) H1 profit significantly increased, and the optical interconnection business is expected to maintain a high level of prosperity.

EB SECURITIES has released a research report stating that YOFC (06869) announced its performance for the first half of 2026, showing that the significant price increase in optical fibers considerably boosted profits. The group's operating revenue grew rapidly, and profitability significantly improved. The bank expects that, from the changes in quarterly performance, the company's Q1 was still affected by low-priced orders from prior periods, with the price increase effects not yet fully reflected; as new price orders gradually take effect, the profit elasticity in Q2 will further be released. Meanwhile, driven by the rapid growth of AI computing power and the iterative upgrade of data center networks, there is an increased demand for high-speed optical modules, AEC, and high-density optical connection products, and the demand for optical interconnection components in data centers is expected to maintain a high level of prosperity, with the revenue proportion of optical interconnection products likely to continue rising. EB SECURITIES' main points are as follows: Event: YOFC (06869) announced its performance for the first half of 2026, ending June 30, 2026, on August 21, 2026. Performance: 1) Rapid growth in operating revenue: In H1 2026, the company achieved operating revenue of 9.809 billion yuan, a year-on-year increase of 53.6%. Among this, the revenue for Q2 2026 was 6.114 billion yuan, a quarter-on-quarter increase of 65.4%. The increase in revenue is mainly attributed to the accelerated construction of AI data centers and the improvement in the supply-demand structure of the optical communication industry, with both sales volume and average prices increasing. 2) Significant improvement in profitability: In H1 2026, the company achieved a net profit attributable to shareholders of 2.925 billion yuan, a year-on-year increase of 888.9%; the net profit attributable to shareholders after deducting non-recurring gains and losses was 2.449 billion yuan, a year-on-year increase of 1,680.5%. In Q2 2026, the net profit attributable to shareholders was 2.430 billion yuan, a quarter-on-quarter increase of 390.7%. With product price increases and optimization of the business structure, the company's profit elasticity has further been released. Optical transmission products: Optical fiber price increases significantly enhance profits In H1 2026, the company's optical transmission segment achieved revenue of approximately 6.126 billion yuan, a year-on-year increase of 59.2%, with a gross profit margin of 63.11%, an increase of approximately 33.5 percentage points year-on-year, significantly enhancing its profitability. Benefiting from the accelerated construction of AI computing infrastructure, the company has seized the growth opportunities in new optical fiber demand for AI, expanding its core customer base and optimizing product structure, leading to increases in both sales volume and average prices, driving growth in revenue and profitability for optical transmission products. According to customs data and statistics from the China International Trade Institute, the average export price of optical fibers and cables in China in H1 2026 rose to 79.49 USD/kg, a year-on-year increase of 234.2%. China Mobile Limited's ordinary optical cable collective procurement for 2026 to 2027 is the largest scale of cable procurement this year, but the first round of bidding has failed; according to C114, the core reason for the failed bid is price, reflecting the current tight supply of optical fibers and a significant upward shift in the price center. While improving both volume and price in its main business, the commercial development of cutting-edge products is also progressing continuously, with cumulative deliveries of hollow-core optical fibers exceeding 10,000 core kilometers, deployed in over 13 commercial and pilot projects both domestically and internationally, setting records for the lowest attenuation of 0.04 dB/km and the longest fiber drawn at 91.2 kilometers. In terms of quarterly performance changes, this bank assesses that Q1 is still impacted by low-priced orders from earlier periods, and the effects of price increases have yet to be fully realized; as new price orders gradually materialize, Q2 will see further release of profit elasticity. Optical interconnection products: Significant increase in demand for data center optical interconnection components In H1 2026, the company's optical interconnection components segment achieved revenue of approximately 2.238 billion yuan, a year-on-year increase of 55.0%, with a gross profit margin of 48.97%, an increase of approximately 8.3 percentage points year-on-year. Driven by the rapid growth of AI computing power and the iterative upgrades in data center networks, internal interconnects in data centers are continuously evolving towards higher speeds of 400G/800G and 1.6T, which is driving increased demand for high-speed optical modules, AEC, and high-density optical connection products. In H1 2026, subsidiary EverProX Technologies (300548.SZ) achieved revenue of 1.480 billion yuan from data communication, consumer, and industrial interconnect businesses, a year-on-year increase of 51.6%, with a gross profit margin of 52.89%, an increase of 7.24 percentage points year-on-year. At the same time, 400G/800G AEC has completed client-phase acceptance, 1.6T AEC has entered market promotion, and the 1.6T optical module has completed scheme selection, while high-density optical connection products have achieved bulk shipments and landed projects at intelligent computing centers. This bank expects that the demand for data center optical interconnection components will likely maintain a high level of prosperity, and the revenue proportion of optical interconnection products is expected to further increase. Risk warning: Risks of fluctuations in raw material prices, risks of slower than expected commercialization of high-end products, risks associated with international business expansion, risks of downstream market demand falling short of expectations, and risks of significant fluctuations in optical fiber prices.