AI computing power + full industry chain of optical cables, TRANSTECH OPTEL (09963) performance turnaround.

In 2026, the fiber optic "super cycle" ignited by AI computing power will drive a simultaneous increase in both volume and price in the global fiber optic market. The massive construction of AI computing clusters is becoming a new growth engine for the fiber optic industry. Data from various institutions indicates that by 2027, the demand for fiber optics driven by AI will jump from less than 5% in the past to 35%. The core logic behind the current recovery in the fiber optic industry stems from a structural demand upgrade driven by AI computing infrastructure, with continued explosive demand for interconnection and high-end computing fiber optics. High-spec, low-loss, and multi-core optical cables are in short supply, significantly pushing the profitability center of the industry upward. Leading companies have achieved substantial performance gains, with Yangtze Optical Fibre And Cable Joint Stock and Hengtong Optic-Electric both doubling their net profits in the first half of the year, and the gross margin of their core optical communication business surpassing 60%. Against this backdrop, Hong Kong-listed small-cap optical communication company TRANSTECH OPTEL (09963) has delivered a turnaround report, achieving a profit of HKD 42.32 million attributable to the parent company, a year-on-year increase of 434.66%. This mid-term performance only reflects the recovery of its existing overseas business and does not yet include the crucial acquisition capacity. Following the consolidation of the Hangzhou preform factory in the second half of the year, the companys performance is expected to see a second surge. I. AI is reconstructing the demand structure of the fiber optic industry, with the profitability center of the sector continuing to rise. Over the past two years, the fiber optic industry has remained in a depressed cycle characterized by overcapacity and bulk procurement price pressure, compressing the gross margins of most manufacturers to low levels. The industry logic will be completely restructured in 2026, as the growth driving force shifts from traditional telecommunications infrastructure to AI computing and ultra-large data center construction. An AI computing cluster at the ten thousand card level consumes 5-10 times more fiber optics than a traditional data center. The large-scale deployment of computing infrastructure is driving massive demand for high-speed optical interconnects, and high-end optical cables are in tight supply, leading the industry to say goodbye to low-price competition and enter a new phase defined by technical premiums, quality premiums, and delivery premiums. Leading companies generally see their optical communication business gross margins break the 60% mark, indicating clear recovery in overall profitability across the industrial chain. The current industry up cycle has just begun, and capital expenditure for AI computing has sustainability, providing long-term support for fiber optic demand, which also offers a solid industry beta foundation for the performance recovery of TRANSTECH OPTEL. II. Strong mid-term performance turnaround confirms the inflection point in core business. Excluding new assets, the company's original overseas main business has achieved substantial turnaround from losses. According to the companys profit forecast, in the first half of 2026, the company recorded a shareholder profit of HKD 42.315 million, compared to a loss of HKD 12.6 million in the same period last year, marking a critical loss profit turnaround. During this period, the companys revenue was HKD 143 million, with gross profit significantly recovering. Additionally, the reversal of accounts receivable impairment indicates solid earnings quality. Compared to the industry low point in 2025, where the company's revenue significantly declined and experienced gross loss, reflecting the operational pressure faced by small and medium-sized enterprises during the downward cycle. A year later, the companys revenue has returned to the HKD 100 million level, gross profit turned positive, and gross margin has returned to a healthy range, reflecting price increases for products, a higher proportion of high-end orders, and an overall improvement in capacity utilization. The company's main business covers all categories of fiber optics, optical cables, and fiber cores, relying on production capacities in Hong Kong and Thailand while deepening its operations in the ASEAN market with a stable customer structure and mature export channels. Its light asset model, with overseas pre-positioning, allows for a more accelerated response and greater flexibility during the industry recovery phase. Additionally, the company officially changed its name to TRANSTECH OPTEL in August, underscoring its focus on the optical communication main business and a more pure strategic positioning aligned with the long-term upward trend of the industry. III. Core incremental advances preemptively: High-quality assets in Hangzhou not yet consolidated, providing ample performance space for the year. When interpreting this interim report, it is important to note that the impressive profits in the first half of 2026 do not reflect the company's true productive capacity ceiling, as upstream asset acquisitions realized within the year have not yet been included in the financial statements. In July 2026, the company completed the acquisition of 51% of Hangzhou Futong Optoelectronics, with the delivery date occurring after the end of the interim reporting period on June 30. Therefore, preform capacities, fiber optic capacities, and corresponding profits are not reflected in the mid-term data and will be fully consolidated starting in the second half of the year. Currently, the production capacities of leading global fiber preform manufacturers are operating at high levels, and their production processes are complex with long construction, commissioning, and certification timelines, extending expansion cycles to 18-24 months. The rigid constraints on the supply side mean that the industry's capacity cannot rapidly respond to the demand surges brought about by AI computing, leading to a continually expanding supply-demand gap. Hangzhou Futong Optoelectronics has mature upstream capacities, especially in preform manufacturing, making it a high-quality asset with complete upstream core manufacturing capability. The deal includes a profit guarantee: for the fiscal year 2026, the target company has committed to a minimum profit of 50 million RMB, resulting in a relatively low acquisition valuation with significant cost-effectiveness and high certainty of performance. This acquisition fundamentally fills the gap in TRANSTECH OPTELs industrial chain. For a long time, fiber preforms have been the most profitable and highest-barrier segment of the industry, and a key factor for leading companies to maintain high gross margins. Through this acquisition, the company has successfully established self-sufficient capacity in upstream optical preforms, while also locking in a stable sales channel with the controlling shareholder for three years. The domestic sales limits for fiber optics will increase year by year from 2026 to 2028, successfully opening up the previously blank domestic market. Consequently, the company has formed a complete layout with Hong Kong fiber optic capacity, a Thailand overseas base, and Hangzhou upstream preform capacity plus domestic sales channels. The profit of over HKD 40 million in the first half only marks the starting point of the industry recovery cycle; the resonance of old and new production capacities in the second half of the year indicates clear potential for exceeding expectations in annual performance. IV. Thailand's geographical advantage builds a differentiated overseas barrier. In contrast to the crowded and competitive domestic manufacturers, TRANSTECH OPTEL's most differentiated advantage lies in its decade-long foresight in Southeast Asia. The company established its production base in Thailand as early as 2017 following its listing, diving deep into the ASEAN operator market and avoiding the harsh price wars of domestic bulk procurements. Southeast Asia currently enjoys dual dividends: first, stable growth in traditional telecommunications 5G and broadband deployments, with ongoing strong demand; second, the region has become a hotspot for global data center and computing investments, leading to rapid expansion of high-end optical cable demand. Coupled with the trend of near-shore supply chain localization, the rarity of locally produced capacity and local delivery capabilities makes these companies uniquely advantageous. The company's years of localized operations have built strong customer relationships and delivery capabilities, continuing to benefit from the industry recovery. Amid the current trend of leading companies expanding overseas, the company's first-mover advantage is continuously realized, showcasing marked competitive advantages through differentiation. V. The small-cap firm exhibits significant elasticity, highlighting its inflection point value. Although the company's revenue and profit scale do not match those of industry giants, in the phase of cycle reversal, the marginal elasticity of small-cap turnaround companies far exceeds that of larger firms with high bases. Firstly, the company has achieved a complete turnaround from losses to a profit at the ten million level, indicating a very high level of operational inflection; secondly, the gross margin has quickly recovered from negative to a reasonable industry level, improving at a leading gradient; thirdly, the business is highly focused on optical communication, with no redundant operations to drag it down, enabling it to fully benefit from this round of industry dividends. Against the backdrop of sustained prosperity in AI optical communication, the company is a typical case of "low-position inflection point + accelerating performance." VI. Objective assessment of risk factors. While the market is on an upward trend, it is still necessary to rationally consider potential variables: Risks of industry cycle fluctuations; if future capital expenditure on computing slows and new capacity is released, it may suppress product prices and gross margins; Acquisition integration risks; the subsequent growth of the Hangzhou factory relies on climbing production capacity and channel digestion; As a small-cap stock listed in Hong Kong, liquidity and valuation volatility are relatively larger. Conclusion In the first half of 2026, thanks to the booming development of the global AI computing network, TRANSTECH OPTEL successfully turned a profit, emerging from the cycle bottom. More importantly, the company benefits from an autonomous full industrial chain layout of optical preforms, fibers, and cables, coupled with factors such as the consolidation of Hangzhou's preform capacity and the expansion of domestic channels in the second half of the year, which will open up a second growth curve. With its differentiated overseas layout, complete industrial chain upgrade, and clear main business strategy, the company is poised to ride the wave of the upward cycle in AI optical communication. In the short term, the performance inflection is clear, and the medium-to-long-term growth logic is straightforward, making it a highly elastic and clearly valued underdog in the fiber optic recovery market.