UBS: Sharply cuts YOFC (06869) target price to HK$180, reiterates "Buy" rating

UBS issued a research report reiterating its "Buy" rating on YOFC (06869, 601869.SH), but due to the broad de-rating of global AI stocks and fragile investor sentiment, it lowered its target P/E multiple and slightly adjusted its earnings forecasts, sharply cutting the H-share 12-month target price by 45.5% from HK$330 to HK$180. The A-share target price is RMB290. The bank noted that third-quarter revenue grew 139% year-on-year and 52% quarter-on-quarter, while gross profit rose 362% year-on-year and 44% quarter-on-quarter; net profit increased 32% quarter-on-quarter to RMB3.2 billion, 4% to 9% above the bank's and market expectations. Gross margin was 57.4%, down 3 percentage points quarter-on-quarter, which is expected to be due to the relatively high proportion of finished cable products. The bank believes that the company's increased exposure to finished cable products is positive, helping it connect directly with customers and enhance value capture. The bank also noted that global optical fiber prices have recently converged toward China levels, reflecting that demand is being driven by global data center construction and is not just a China phenomenon, which supports demand sustainability. The premium of China's G657.A1 optical fiber relative to the US/Europe has narrowed to about 6%/19%. The bank slightly adjusted YOFC's earnings forecasts for each year from 2026 to 2028, ranging from a 5% cut to a 4% increase, and lowered the H-share 2027 target P/E multiple from 16x to 9x; the current price is only equivalent to about 5x forecast 2027 P/E, and the bank believes the valuation is overly harsh.