Dongwu Securities: Maintains "buy" rating for Yunnan Ge Industry, as the quantity and price of indium phosphide rise simultaneously, with performance surpassing market expectations.

East Wu Securities research report pointed out that the price and quantity of indium phosphide were rising together, and Yunnan Ge industry's performance exceeded market expectations. The company is expected to achieve a net profit attributable to shareholders of 55-80 million yuan in the first half of 2026, a year-on-year increase of 148%-261%; a non-deductible net profit of 52-67 million yuan, a year-on-year increase of 576%-771%, exceeding market expectations. Indium phosphide is a core basic material for optical modules, and the downstream shipment volume of 800G/1.6T optical modules continues to increase, while global InP production capacity expansion is limited by single crystal growth yield and long-period equipment delivery, resulting in extremely low short-term supply elasticity. Coherent believes that the supply-demand imbalance of indium phosphide will last at least throughout 2026 and 2027. From early 2025 to April 2026, the price of 2-inch communication-grade indium phosphide substrates nearly doubled. With the widening gap between supply and demand for high-end substrates, it is expected that the price of indium phosphide substrates will continue to rise in the second half of 2026. Yunnan Ge industry is optimistic as a core supplier of scarce upstream substrate materials in the AI industry chain, and is expected to benefit fully from the acceleration of AI computing power infrastructure and commercial space development. The "buy" rating is maintained.