TFC(SZ:300394)2025-10-31 01:53Summary of Suzhou TFC Optical Communication 3Q25 Earnings Call Company Overview - Company: Suzhou TFC Optical Communication (300394.SZ) - Date of Report: 29 Oct 2025 Key Financial Results - Revenue: Increased by 74% YoY to Rmb1.46 billion, which was 11% below Bloomberg consensus estimates [1][3] - Gross Profit: Rose by 59% YoY to Rmb785 million, 7% below estimates, with a gross margin decline of 5.4 percentage points to 53.7% [1][3] - Operating Profit: Increased by 66% YoY to Rmb644 million, 4% below estimates [1][3] - Net Profit: Grew by 76% YoY to Rmb566 million, 15% below estimates and below investor expectations of approximately Rmb700 million [1][3] Core Insights - Disappointment Factors: The results were negatively impacted by: - A longer-than-expected shortage of 200G EML components - Slower order pull-in for 1.6T transceivers - Slowing growth in passive optical components [1][3] - Future Outlook: Anticipation of more details in the upcoming earnings call, with a preference for competitors Innolight and Eoptolink over TFC Optical [1] Valuation and Investment Recommendation - Current Price: Rmb194.50 - Target Price: Rmb196.00, implying an expected share price return of 0.8% and a total return of 1.1% [2] - Market Capitalization: Rmb151.21 billion (approximately US$21.30 billion) [2] - Valuation Methodology: Target price based on a 36.0x FY26E PE, reflecting expected strength in 1.6T and higher 800G contributions from new customers [5] Risks - Downside Risks: Potential risks that could hinder stock performance include: - Slower-than-expected new product development - Slower global AI development - Delays in AI infrastructure and data center investments - Ongoing China-US tech disputes [6] Competitor Analysis - Eoptolink Technology: Target price of Rmb472 based on a 24.0x FY26E PE, considering strong cycles in 800G and 1.6T [7] - Innolight: Target price of Rmb569 based on a 25x FY26E forward PE, factoring in margin upside from higher SiPh transceiver sales [9] Conclusion - The earnings call highlighted significant growth in revenue and profits for Suzhou TFC Optical Communication, despite missing market expectations. The company faces challenges in component shortages and market dynamics, with a cautious outlook on future performance. The investment recommendation remains a "Buy" based on long-term growth potential, but risks are present that could affect stock performance.