YOFC shares tumbled 9% on Wednesday after Goldman Sachs reiterated a Neutral rating on the fiber optic cable maker, citing steady AI-driven demand but near-term production declines. The broker maintained its HKD290 target price, implying roughly 25% upside from the closing level of HKD232.4.
YOFC (06869.HK) fell as much as 9% to HKD229.2 on Wednesday, the steepest intraday drop in three months, after Goldman Sachs held a Neutral rating on the stock while noting that AI data center demand is supporting fiber pricing across mainland China.
"China's fiber optic cable demand remains strong, driven by data center customers, although still at a low base compared to telecom," Goldman Sachs analysts wrote in a note reviewing production, pricing and demand trends. The broker kept its 12-month target price at HKD290, corresponding to 17.7 times 2029 estimated earnings, and described the valuation as reasonable.
The decline came as National Bureau of Statistics data showed China's fiber optic cable output fell 6% year-over-year in March and 16% in April, which Goldman attributed to a temporary capacity shift between telecom and data center applications. The price of G652.D fiber edged down to RMB81.9 per fiber-kilometer in May from RMB83.4 in March, according to CRU data, though it remained above year-ago levels on strong demand. Turnover reached HKD2.6 billion on 10.8 million shares traded, with short selling accounting for 8.4% of total turnover at HKD496 million.
The selloff came despite Goldman's target implying about 25% upside from Wednesday's close of HKD232.4. YOFC's short-term production headwinds and slight pricing erosion may overshadow the positive AI narrative in the near term, though data center demand remains a structural growth driver for the broader fiber optic sector. The stock has more than doubled over the past 12 months on AI-related enthusiasm, making it vulnerable to profit-taking on negative news.
Morgan Stanley had previously raised its target price to HKD230, cautioning that high earnings expectations were already priced into the stock. The divergence between the two Wall Street banks highlights the valuation debate surrounding YOFC after its sharp rally. At Goldman's HKD290 target, the stock would trade at nearly 18 times 2029 earnings, a multiple that reflects long-term AI demand but leaves little room for near-term disappointments.
The broader Hong Kong market showed mixed trading, with the Hang Seng Index fluctuating as investors weighed AI infrastructure spending against near-term earnings visibility. YOFC's decline stood out as one of the largest single-stock drops on the exchange by turnover, reflecting the market's sensitivity to any signs of softening in the AI supply chain narrative. The stock opened 2.1% lower before accelerating losses through the morning session, with selling pressure persisting into the afternoon.
Competitors in the fiber optic space, including Hengtong Optic-Electric and FiberHome Telecommunication Technologies, have also benefited from the AI data center buildout, though YOFC remains the largest listed pure-play fiber optic cable maker in China by market capitalization. The sector's outlook hinges on whether the capacity shift from telecom to data center applications proves temporary, as Goldman suggested, or signals a more structural slowdown in traditional telecom demand.
This article is for informational purposes only and does not constitute investment advice.
