Fiber optic stocks fall as Hengtong's $9.3B rights issue fuels overcapacity fears
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Fiber optic concept stocks led declines in Hong Kong trading on September 25, with Yangtze Optical Fibre and Cable (06869) falling 11.37% to HK$165.3, Junzhi Group (01300) dropping 8.84% to HK$3.145, and Huiju Technology (01729) losing 3.41% to HK$16.73. The sell-off followed Hengtong Optic-Electric's announcement on the evening of September 24 of a private placement plan to issue up to 740 million A-shares, raising no more than 66.36 billion yuan ($9.2 billion) for nine projects including optical communications. Key projects include 758 million yuan for a new-generation optical fiber R&D and production project and 862 million yuan for an Inner Mongolia optical high-end optical materials project, both aimed at expanding capacity for optical fiber preforms and specialty fibers. UBS recently initiated coverage on China's fiber optic cable industry, stating that investor concerns about capacity glut and peak earnings in 2027 are significantly overblown. UBS noted that Yangtze Optical has fallen 37% since its June peak due to fears that capacity expansions by peers and new entrants could cap earnings by 2027, but the bank believes the risk of overcapacity is limited.
Source report
Hong Kong-listed fiber optic stocks experienced notable declines today, driven by market reactions to a major capacity expansion announcement from industry leader Hengtong Optic-Electric.
Key Stock Movements
As of the time of reporting:
- Yangtze Optical Fibre and Cable (06869.HK): Down 11.37%, trading at HKD 165.30
- Junzhi Group (01300.HK): Down 8.84%, trading at HKD 3.145
- Convergence Technology (01729.HK): Down 3.41%, trading at HKD 16.73
Background: Hengtong Optic-Electric's Fundraising Plan
On the evening of September 24, Hengtong Optic-Electric, a leading fiber optic company, disclosed a private placement proposal:
- Plans to issue up to 740 million A-shares
- Total fundraising target: no more than RMB 6.636 billion
- Funds to be allocated to nine projects, including optical communications
Key investment allocations include:
- "Next-Generation Optical Fiber R&D and Production Project": RMB 758 million
- "Inner Mongolia High-End Optical Materials Construction Project": RMB 862 million
These two projects form the core of the company's capacity expansion for optical fiber preforms and specialty optical fibers.
Analyst Perspective: UBS Weighs In
UBS recently published its first coverage report on China's fiber optic cable industry, stating that investor concerns over capacity oversupply and peak earnings by 2027 are significantly overestimated.
According to UBS:
- Since its stock price peaked in June, Yangtze Optical Fibre and Cable has fallen 37%
- The decline is attributed to investor worries that capacity expansions announced by both peers and new entrants could lead to peak earnings for the company by 2027
- However, UBS believes the risk of capacity oversupply is limited
Source
智通财经网Regional
Part of this Story
Yangtze Optical Fibre drops 5% as UBS raises target to HK$330, sees limited overcapacity risk