Company Overview - Hengtong Optic-Electric Co., Ltd. is located in Suzhou, Jiangsu Province, China, established on June 5, 1993, and listed on August 22, 2003 [1] - The company specializes in high-end technology, product research and development, and system integration services in the fields of communication networks and energy interconnection, as well as global submarine cable communication network construction [1] Financial Performance - For the first half of 2025, Hengtong Optic-Electric achieved operating revenue of 32.049 billion yuan, a year-on-year increase of 20.42% [2] - The net profit attributable to shareholders for the same period was 1.613 billion yuan, reflecting a year-on-year growth of 0.24% [2] - Cumulative cash dividends since the A-share listing amount to 2.614 billion yuan, with 1.121 billion yuan distributed over the past three years [3] Shareholder Information - As of June 30, 2025, the number of shareholders decreased by 11.80% to 161,700, while the average circulating shares per person increased by 13.38% to 15,118 shares [2] - The top ten circulating shareholders include Hong Kong Central Clearing Limited, which holds 64.5046 million shares, an increase of 10.1831 million shares from the previous period [3] - Southern CSI 500 ETF and GF High-end Manufacturing Stock A also increased their holdings, while Jiao Yin Selected Mixed Fund exited the top ten circulating shareholders list [3] Stock Performance - On September 4, Hengtong Optic-Electric's stock price fell by 2.01% to 20.48 yuan per share, with a trading volume of 814 million yuan and a turnover rate of 1.58% [1] - The company's total market capitalization is 50.519 billion yuan [1] - Year-to-date, the stock price has increased by 20.54%, with a 0.15% decline over the last five trading days, a 27.52% increase over the last 20 days, and a 36.08% increase over the last 60 days [1] Business Segments - The main revenue composition includes: Smart Grid (36.98%), Copper Conductor (25.02%), Industrial and New Energy Intelligence (11.28%), Optical Communication (10.94%), Marine Energy and Communication (9.57%), and Others (5.33%) [1] - The company operates within the communication equipment industry, specifically in communication cables and related products, and is involved in sectors such as optical fiber and cable, 5G, new energy vehicles, the Internet of Things, and new infrastructure [1]

Group 1 - The communication equipment sector rose by 2.61% on September 3, with Zhongji Xuchuang leading the gains [1] - The Shanghai Composite Index closed at 3813.56, down 1.16%, while the Shenzhen Component Index closed at 12472.0, down 0.65% [1] - Notable individual stock performances included Zhongji Xuchuang with a closing price of 426.19, up 10.99%, and Shijia Photon with a closing price of 82.42, up 4.73% [1] Group 2 - The communication equipment sector experienced a net outflow of 1.734 billion yuan from institutional funds and 1.172 billion yuan from retail funds, while individual investors saw a net inflow of 2.906 billion yuan [3]

Group 1 - The A-share market saw a rebound in CPO concept stocks, with notable gains in several companies [1] - Changfei Fiber reached the daily limit increase, while Zhongji Xuchuang rose over 9% [1] - Other companies such as Shijia Photon, Guangku Technology, and Tiantong Co. also experienced significant increases, with gains exceeding 6% [1] Group 2 - Detailed stock performance includes: - Changfei Fiber (code: 601869) increased by 10% with a market cap of 69 billion and a year-to-date increase of 205.92% [2] - Zhongji Xuchuang (code: 300308) rose by 9.23% with a market cap of 466 billion and a year-to-date increase of 240.96% [2] - Shijia Photon (code: 688313) increased by 7.75% with a market cap of 39 billion and a year-to-date increase of 418.23% [2] - Guangku Technology (code: 300620) reported a 6.81% increase with a market cap of 26.7 billion and a year-to-date increase of 120.71% [2] - Tiantong Co. (code: 600330) saw a 6.04% increase with a market cap of 13.2 billion and a year-to-date increase of 51.29% [2]

Group 1 - The CPO concept stocks in the A-share market have rebounded, with notable gains in several companies [1] - Changfei Fiber has reached the daily limit increase, while Zhongji Xuchuang has risen over 9% [1] - Other companies such as Shijia Photon, Guangku Technology, and Tiantong Co. have also shown significant increases, with gains exceeding 6% [1] Group 2 - The following companies have reported their stock performance: - Changfei Fiber (code: 601869) increased by 10% with a total market value of 69 billion and a year-to-date increase of 205.92% [2] - Zhongji Xuchuang (code: 300308) rose by 9.23% with a market value of 466 billion and a year-to-date increase of 240.96% [2] - Shijia Photon (code: 688313) increased by 7.75% with a market value of 39 billion and a year-to-date increase of 418.23% [2] - Guangku Technology (code: 300620) rose by 6.81% with a market value of 26.7 billion and a year-to-date increase of 120.71% [2] - Tiantong Co. (code: 600330) increased by 6.04% with a market value of 13.2 billion and a year-to-date increase of 51.29% [2] - Other companies such as Juguang Technology, Zhili Fang, and Jufei Optoelectronics also reported gains between 4% to 5% [2]

Core Insights - The article discusses the decline in China's optical cable production, with a reported decrease of 8.5% year-on-year in July 2025, resulting in a total production of 20.88 million core kilometers [1] - Cumulative production from January to July 2025 reached 146.21 million core kilometers, reflecting a 3.8% decline compared to the previous year [1] Company Insights - Listed companies mentioned include Changfei Optical Fiber (601869), TeFa Information (000070), Zhongtian Technology (600522), and Hengtong Optic-Electric (600487) [1] Industry Insights - The data is sourced from the National Bureau of Statistics and compiled by Zhiyan Consulting, which provides comprehensive industry research reports and market assessments [2]

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Investment Rating - The investment rating for the company is "Buy" and is maintained [6] Core Views - The company achieved steady revenue growth in Q2 2025, with improvements in both year-on-year and quarter-on-quarter expenses. The deep-sea economic policy benefits are becoming evident, leading to a renewal of undersea cables, and the company has a substantial order backlog in its marine business. Breakthroughs have been made in high-end specialty optical fibers, including ultra-low loss, multi-mode, and hollow-core fibers. Continuous share buybacks and shareholder increases reflect long-term confidence [3][9][10]. Summary by Relevant Sections Financial Performance - In H1 2025, the company reported revenue of 32.05 billion yuan, a year-on-year increase of 20.4%. The net profit attributable to shareholders was 1.61 billion yuan, up 0.2% year-on-year. In Q1 2025, revenue reached 18.78 billion yuan, a year-on-year increase of 26.6% and a quarter-on-quarter increase of 41.5% [3][9]. Business Opportunities - The government has prioritized "deep-sea technology" in its future industry focus, benefiting the company as a key player. The company is one of the top four global providers of comprehensive solutions for transoceanic submarine cable systems, with over 108,000 kilometers of submarine cable delivered. In the marine energy sector, the company continues to win bids for offshore wind and oil and gas projects, with an order backlog of approximately 20 billion yuan in energy interconnection and about 7.5 billion yuan in marine communication [9][10]. Technological Advancements - The company is seizing opportunities in AI development, achieving key breakthroughs in high-end optical fiber products. The G.654.E fiber has industry-leading attenuation levels, and self-developed OM4/OM5 multi-mode fibers are widely used in medium and large data centers. The hollow-core anti-resonance fiber has achieved internationally advanced loss values (≤0.2 dB/km) and has mass delivery capabilities [9][10]. Shareholder Confidence - The company completed a new round of share buybacks in January 2025, repurchasing 14.17 million shares for 156 million yuan, which will be used for an employee stock ownership plan. Additionally, the controlling shareholder announced a plan to increase its stake in the company by no less than 150 million yuan and no more than 300 million yuan over the next 12 months, demonstrating long-term confidence in the company's development [9][10]. Profit Forecast and Investment Suggestion - The company is expected to maintain steady revenue growth, with net profits projected at 3.343 billion yuan, 3.824 billion yuan, and 4.266 billion yuan for 2025-2027, corresponding to year-on-year growth rates of 21%, 14%, and 12%. The corresponding price-to-earnings ratios are 15x, 13x, and 12x, respectively, with a strong recommendation to "Buy" [9][10].

Group 1 - The core index of the CSI 500 Communication Services Index is reported at 6578.12 points, with a monthly increase of 15.55%, a three-month increase of 28.52%, and a year-to-date increase of 33.48% [1] - The CSI 500 Index is categorized into 11 primary industries, 35 secondary industries, and over 90 tertiary industries, providing a comprehensive analysis tool for investors [1] - The top ten weighted stocks in the CSI 500 Communication Services Index include: Yanshan Technology (8.24%), Giant Network (7.26%), Hengtong Optic-Electric (6.85%), Kaiying Network (6.74%), Guangxun Technology (5.64%), Wangsu Science & Technology (5.04%), Haige Communication (4.92%), Light Media (4.91%), Shenzhou Taiyue (4.59%), and BlueFocus Communication Group (4.22%) [1] Group 2 - The industry composition of the CSI 500 Communication Services Index shows that cultural entertainment accounts for 42.70%, communication equipment for 33.92%, digital media for 10.28%, data centers for 8.88%, and marketing and advertising for 4.22% [2] - The index sample is adjusted biannually, with adjustments occurring on the next trading day after the second Friday of June and December each year [2] - In the event of special occurrences affecting a sample company's industry classification, the CSI 500 Industry Index sample will be adjusted accordingly [2]

Summary of Hengtong Optic-Electric Conference Call Company Overview - **Company**: Hengtong Optic-Electric - **Date**: August 30, 2025 Key Industry and Company Insights Industry: Optical Fiber and Energy 1. **Product Structure Optimization**: Hengtong has made significant breakthroughs in high-end and specialty optical fibers, including ultra-low loss, marine, multimode, and hollow fibers, achieving international advanced levels in hollow anti-resonant fiber loss values [1][3] 2. **Investment in AI**: The company is investing in an advanced optical fiber materials R&D and manufacturing center to enhance the delivery capacity of specialty fibers [1] 3. **Energy Sector Progress**: Hengtong has made notable advancements in marine energy and smart grid sectors, with over 20GW of projects approved or competitively bid since Q4 2024, and nearly 3 billion yuan in marine energy projects won in 2025 [1][5] Financial Performance 1. **Revenue Growth**: In H1 2025, Hengtong achieved a revenue increase of 20% year-on-year, with a net profit of 1.613 billion yuan, marking a historical high [2] 2. **Business Segment Contributions**: By H1 2025, the smart grid and industrial new energy segments accounted for approximately 50% of total business, while marine energy and communication segments made up 10%, and traditional optical communication accounted for 20% [7][30] Optical Communication Developments 1. **High-End Product Revenue**: The revenue share of high-quality specialty products, such as ultra-low loss and marine fibers, increased from about 10% to nearly 20% in H1 2025, with plans to reach 30% or higher in the future [3][13] 2. **Profit Margins**: The gross margin for optical communication business is approximately 25%, with improvements driven by product structure optimization [8][30] 3. **Response to Cost Pressures**: Despite rising prices of silicone, Hengtong successfully increased its gross margin by enhancing the proportion of high-end products [9] Marine Communication Sector 1. **Cable Delivery Milestones**: As of the reporting period, Hengtong's global submarine cable delivery exceeded 108,000 kilometers, with an order backlog of about 7.5 billion yuan [6][19] 2. **PEACE Project Expansion**: The company plans to construct the Gulf extension of the PEACE project, expected to reach the UAE and Oman by Q3 2026 [6] Energy Sector Highlights 1. **Marine Energy Orders**: In the marine energy sector, over 30% of the 20 billion yuan in energy orders are related to submarine cables, with minimal contributions from engineering projects [24] 2. **Smart Grid Growth**: The smart grid segment's gross margin improved to over 14%, while the industrial new energy segment's gross margin rose to over 15% [30] Market Outlook 1. **Future Growth Potential**: Hengtong's various business sectors, including optical communication, marine energy, and smart grids, are expected to benefit from increasing demand driven by AI, cloud computing, and data center developments [31] 2. **International Market Expansion**: The company has seen strong performance in overseas fiber optic cable exports, with significant demand from regions such as South Africa, Brazil, Germany, and India [18] Additional Insights 1. **Order Confirmation Method**: Hengtong uses the percentage of completion method for revenue recognition, allowing for a clearer understanding of future revenue growth based on order progress [21] 2. **Optimistic Market Sentiment**: The company maintains a cautiously optimistic outlook for the second half of 2025 and 2026, despite slight declines in bidding volumes from major clients like China Mobile [15][16] This summary encapsulates the key points from the conference call, highlighting Hengtong Optic-Electric's strategic advancements, financial performance, and market outlook across its various business segments.

Core Viewpoint - The company reported strong revenue growth in the first half of 2025, driven by its marine communication and energy sectors, while facing some challenges in net profit margins [1][2]. Group 1: Financial Performance - In the first half of 2025, the company achieved revenue of 32.049 billion yuan, a year-on-year increase of 20.42%, and a net profit attributable to shareholders of 1.613 billion yuan, up 0.24% year-on-year [1]. - For the second quarter of 2025, the company reported revenue of 18.781 billion yuan, a year-on-year increase of 26.64% and a quarter-on-quarter increase of 41.55% [1]. - The net profit for the second quarter was 1.056 billion yuan, showing a year-on-year decline of 3.63% but a significant quarter-on-quarter increase of 89.74% [1]. Group 2: Industry Trends - The marine communication and energy sectors are expected to benefit from the growing demand for submarine cable construction and deep-sea development [2]. - By the end of 2025, it is projected that over 600 submarine cables will be operational globally, with an expected new length of 1.6 million kilometers from 2026 to 2040 [2]. - The company has secured contracts for over 10,800 kilometers of submarine cables and has an order backlog of approximately 7.5 billion yuan in marine communication [2]. Group 3: Product Development - The company is optimizing its optical communication product structure, with an increased focus on high-end products such as ultra-low-loss fibers and hollow-core fibers [3]. - The export demand for optical fibers is strong, particularly in overseas markets, with export volumes for optical rods, cables, and fibers increasing by 64.2%, 1.9%, and 45.2% year-on-year, respectively [3]. - The company is expanding its production capacity for advanced optical fiber materials, which is expected to meet the growing demand driven by AI applications [3]. Group 4: Profit Forecast and Valuation - The company's profit forecast for 2025 has been revised down by 3% to 3.225 billion yuan, while the forecast for 2026 remains unchanged [4]. - The current stock price corresponds to a P/E ratio of 15.7 for 2025 and 12.8 for 2026, with a target price of 24.30 yuan, indicating a potential upside of 19% [4].