The demand for fiber optic cables continues to increase, and Changfei can benefit from it

Last Friday, the Hang Seng Index opened higher but reached its daily high at the opening level. Subsequently, it fluctuated back and forth and spent most of the time ranging between 19,360 and 19,500 points. The index had a daily volatility of 170 points with a trading volume of 91.25 billion yuan. The Hang Seng Index and the H-share Index rose by 0.33% and 0.23% respectively, while the Hang Seng Tech Index declined by 0.2%.

The Hang Seng Index closed with a bearish candlestick after reaching a high since June 21, and filled the downward gap from that day; fortunately, it managed to rise above the 250-day moving average and hold above it.

MACD bull spread widens, with 794 stocks rising and 855 stocks falling throughout the day. The overall market condition is slightly weak, not as strong as the index, with a hint of "selling pressure."

Cathay Pacific (0293) announced its interim results at noon on the same day, expecting a net profit attributable to shareholders of approximately HKD 4 billion to HKD 4.5 billion for the first half of 2023, compared to a net loss attributable to shareholders of HKD 4.999 billion in the same period last year. Cathay Pacific's stock price rose in the afternoon and closed with a 4.68% increase.

Changfei Fiber Optic Cable (6869) is primarily engaged in the production and sale of various standard specifications of fiber optic preforms, fibers, and cables widely used in the telecommunications industry. It also provides other related products and services. In the first quarter of 2023, the group's revenue was 3.195 billion yuan, a year-on-year increase of 2.53%. The net profit attributable to shareholders was 241 million yuan, a year-on-year increase of 18.4%. The increase in net profit is attributed to the company's internationalization and diversification expansion during the period, as well as the increase in sales volume of its main products.

On the other hand, the Ministry of Commerce has decided to initiate a final review investigation on the anti-dumping measures applicable to imported optical fiber preforms originating from Japan and the United States, starting from July 11, 2023. In addition, China Mobile (0941) recently announced the centralized procurement results for general optical cable products from 2023 to 2024, with Changfei and other fourteen fiber optic cable companies winning the bids. Among them, Changfei Fiber Optic Cable Co., Ltd. secured a bid share of 19.36%. Furthermore, a major bank pointed out that with the mutual promotion of mainland data center construction and network traffic growth, it is expected to support the continuous growth in demand for fiber optic cables, which is anticipated to benefit the group's business.

The group's stock price has recently been trending upward, and there are signals of its presence in the financial technology system. The group is valued at a relatively low level compared to peers. If valued at a P/E ratio of 7.5, the group's target price would be HK$12.94.

The author is a licensed professional of the China Securities Regulatory Commission (CSRC) and does not hold any of the aforementioned shares.The above article represents personal opinions.