Core Viewpoint - Tianfu Communication is a leading manufacturer of passive optical devices in China, with a focus on research, design, precision manufacturing, and sales of optical passive devices, and is involved in various sectors including LiDAR, optical communication, and nuclear fusion [1] Financial Performance - For Q3 2025, Tianfu Communication reported revenue of 3.918 billion yuan, ranking 9th in the industry, significantly lower than the top competitor ZTE's 100.52 billion yuan and second-ranked Zhongji Xuchuang's 25.005 billion yuan [2] - The company's net profit for the same period was 1.466 billion yuan, ranking 4th in the industry, again lower than Zhongji Xuchuang's 7.57 billion yuan and Xinyi's 6.327 billion yuan, but higher than the industry average of 668 million yuan [2] Profitability and Debt Management - As of Q3 2025, Tianfu Communication's debt-to-asset ratio was 16.45%, down from 16.90% year-on-year and significantly lower than the industry average of 38.12%, indicating strong debt management [3] - The gross profit margin for Q3 2025 was 51.87%, although it decreased from 58.21% year-on-year, it remains above the industry average of 30.08%, reflecting robust profitability [3] Executive Compensation - The chairman, Zou Zhinong, received a salary of 2.1695 million yuan in 2024, an increase of 566,300 yuan from 2023 [4] - The general manager, Ou Yang, earned 1.9995 million yuan in 2024, up by 561,400 yuan from the previous year [4] Shareholder Information - As of September 30, 2025, the number of A-share shareholders decreased by 11.50% to 121,900, while the average number of shares held per shareholder increased by 12.99% to 6,363.67 shares [5] - Major shareholders included Hong Kong Central Clearing Limited and various ETFs, with some shareholders reducing their holdings [5] Research and Development - In the first three quarters of 2025, Tianfu Communication's revenue increased by 64% year-on-year to 3.918 billion yuan, with a net profit growth of 50% to 1.5 billion yuan [6] - The company maintained a strong focus on R&D, with R&D expenses reaching 200 million yuan, a 15.82% increase year-on-year, representing a 5.11% R&D expense ratio [7] - The company is actively pursuing international expansion and has established a dual headquarters and multiple R&D centers [7]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 211.92 [2][9]. Core Views - The company is expected to benefit from the release of demand for its 1.6T optical engines, with a strong outlook in the CPO field [6][9]. - The company reported a revenue increase of 64% year-on-year for the first three quarters of 2025, with a net profit increase of 50% [6]. - The gross margin for the first three quarters of 2025 was 51.87%, showing a year-on-year decline but a quarter-on-quarter improvement [7]. Financial Forecasts - Revenue projections for the company are as follows: - 2024: RMB 3,252 million (up 67.74%) - 2025E: RMB 5,736 million (up 76.41%) - 2026E: RMB 7,392 million (up 28.86%) - 2027E: RMB 8,710 million (up 17.84%) [5]. - Net profit forecasts are: - 2024: RMB 1,344 million (up 84.07%) - 2025E: RMB 2,320 million (up 72.71%) - 2026E: RMB 3,041 million (up 31.04%) - 2027E: RMB 3,601 million (up 18.41%) [5]. - The company’s EPS is projected to be: - 2024: RMB 1.73 - 2025E: RMB 2.98 - 2026E: RMB 3.91 - 2027E: RMB 4.63 [5]. Market Position and Trends - The company is positioned to benefit from the ongoing demand for AI computing power, with expectations of continued growth in the global 800G optical communication industry [8]. - The company has established itself within the supply chain of major global clients, enhancing its market position [8]. - The anticipated upgrade to 1.6T optical modules is expected to contribute significantly to the company's revenue growth [8].