[ET Net News Agency, 13 November 2019] HSBC Qianhai Securities Research lowered its
target price for YOFC (06869) to HK$35 from HK$42.3 and maintained its "hold" rating.
The research house said China Telecom's (00728) recent optical cable tender in August
2019 implies a bidding price of RMB69.55 per fibre kilometre (fkm), which is 13% higher
than China Mobile's (00941) tender price of RMB61.8/fkm in March 2019, but represents a
YoY decline of more than 40%.
However, HSBC does not expect a sharp price recovery ahead as leading optical cable and
fibre makers with in-house preform production capacity, such as YOFC, Hengtong, and
Zhongtian, have all generated double-digit gross margins and remained profitable in recent
quarters.
YOFC's gross margin rebound from 20% in 2Q to 25% in 3Q suggests product mix
optimisation, with YOFC increasing its sales exposure to preform and fibre.
HSBC cut its earnings estimates by 6% in 2019, 8% in 2020, and 4% in 2021. (KL)
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06869 YOFC
Nominal 
8.880 +0.190 (+2.186%) Research Report
13/11/2019 15:34
{I-bank focus}HSBC lowers YOFC (06869) to HK$35; "hold"
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