YOFC Optical Fiber and Cable: AI demand drives the stock price to soar 14 times, but production capacity is about to be overcapacity, downgraded to Hold (Jefferies)

Street Signal | YOFC Optical Fiber and Cable: AI demand drives the stock price to soar 14 times, but production capacity is about to be overcapacity, downgraded to Hold (Jefferies)

The Jefferies report pointed out that due to the rise in optical fiber prices driven by AI demand, the stock price of YOFC Optical Fiber and Cable (6869.HK) has risen approximately 14 times in the past 12 months, and its profits in 2026 are expected to increase 10 times year-on-year.

However, China and the world's optical fiber production capacity will expand rapidly, the supply and demand pattern will reverse, and 2026 may become the peak of the price and profit cycle. Based on the SOTP valuation, the upside potential is only about 9%, and Jefferies downgraded the company's rating from "Buy" to Hold (Hold).

The market has placed a very high premium on the AI-driven explosion in optical fiber demand, but may have seriously underestimated the risk of the cycle peaking due to the rapid expansion of the supply side.

One-sentence conclusion: The stock price of YOFC Optical Fiber & Cable has fully or even over-reflected the short-term profit explosion brought by AI, and the risk of cycle peaking caused by the rapid expansion of production capacity is accumulating. The risk-return ratio is not good at this time, and extreme caution is required when pursuing higher prices.

Positive/negative: negative for YOFC Optical Fiber Cable (6869.HK). The stock price has been priced in the most optimistic profit expectations, and the downside risk of the peak of the cycle may be ignored by the market. Catalysts:

1) Announcements of production expansion plans by major global and Chinese optical fiber manufacturers;

2) Optical fiber price trends, whether there is an inflection point signal;

3) The company's subsequent quarterly results to verify whether profits have peaked.