Morgan Stanley has released a research report stating that YOFC (06869) has declined approximately 50% from its June 2026 high, yet the profit growth trajectory supported by the AI-driven fiber optic supercycle remains unchanged.

The firm believes the valuation derating has created a highly attractive buying opportunity and has decided to upgrade its rating on the H-shares from "Equal-weight" to "Overweight," reflecting a more compelling risk-reward profile following the recent stock price correction, while maintaining its target price of HK$230.

The report notes that the positive earnings pre-announcement released by YOFC on July 14 indicates its Q2 2026 profit is expected to reach between 1.9 and 2.5 billion yuan, making the firm's full-year profit forecast of 7.5 billion yuan highly achievable.

Furthermore, while market concerns previously existed regarding supply risks from new capacity expansions, the firm anticipates that capacity expansion will require time, while demand driven by the booming AI infrastructure remains robust. Therefore, the profit growth momentum over the next 6 to 12 months is not expected to change substantially.

YOFC is also a leader in next-generation technological innovation, having successfully completed the world's first field trial of a Hollow-Core Fiber (HCF) Wavelength Division Multiplexing (WDM) transmission system in June 2026, further solidifying its technological leadership.

Morgan Stanley currently forecasts that YOFC's net profit for 2026 and 2027 will reach 7.507 billion yuan and 12.730 billion yuan, respectively, which are 10% and 27% above market consensus estimates, reflecting the firm's more optimistic view on its near-term profit momentum.