银河国际：20190425-China_Galaxy_International-YOFC.HK)The_moment_of_truth

银河国际4月25日发布对长飞光纤光缆的研报，摘要如下：

UnderPERforming its peers in the equipment segment YOFC is expected to announce its Q1 2019 results after market close on 26 Apr 2019. We expect YOFC to report a 4% YoY decline in revenue to RMB2,366.7m in Q1 2019 and a 30% YoY decline in net profit to RMB260.3m. We expect YOFC’s net profit margin to recover from 8.7% in Q4 2018 to 11% in Q1 2019, which is still down YoY from 15.1% in Q1 2018. The YoY decline in turnover is due to weaker-than-expected market demand for optical fibre and optical fibre cable, as telecom operators have been focusing wireless network investment (4G coverage and the upcoming 5G roll-out) since 2H 2018. In our view, Q1 2019 is already a less challenging period for YOFC, as the impact of China Mobile’s tender launched earlier this year will emerge only in the coming quarters. The YoY comparison will be more unfavourable, as Q2 and Q3 2018 were strong quarters for YOFC. We don’t expect any upward revision of earnings forecasts by the market after the Q1 2019 results announcement. Near-term outlook remains challenging As discussed earlier, there was an oversupply of optical fibre and optical fibre cable, which along with the China Mobile (CM) tender for optical fibre, will have a negative effect on YOFC’s revenue and profitability in 2019. We expect YOFC management to discuss further the overall impact of CM’s central bidding on the Chinese and global optical fibre and cable industry after its Q1 2019 results announcement. However, given the latest Q1 results released by China Mobile and China Unicom, we do not expect any significant pick-up in demand for optical fibre and optical fibre cable in the near term. We maintain our view that the near-term outlook for YOFC remains challenging and that visibility remains low at this stage. No bottom fishing yet In the long term, YOFC’s growth will be supported by new product development, such as ULL optical fibre, which is expected to be used to upgrade the main trunk of the optical fibre network of Chinese telecom operators. However, we believe that the market might wait for confirmation of demand for new products before re-rating YOFC. We still believe the market will prefer equipment names with better supply–demand dynamics and growth outlook. We share the view that there is divergence between share price performance of YOFC and its peers’. But we still maintain that it is not time to re-visit YOFC. Valuation not really attractive YOFC is now trading at 13.4x 2019F PER and 11.5x 2020F PER, which doesn’t look particularly attractive, given its challenging near-term outlook.