The AI model arms race is reshaping the growth cycle of the entire optical fiber industry, a trend confirmed by the first-quarter results from global leader Yangtze Optical Fibre And Cable Joint Stock Limited Company. For the first quarter of 2026, the company reported operating revenue of 3.695 billion yuan, a year-on-year increase of 27.70%. Net profit attributable to shareholders reached 495 million yuan, surging 226.40% compared to the same period last year. After excluding non-recurring items, net profit attributable to shareholders was 461 million yuan, an increase of 966.44%. The most significant highlight of the quarter was the substantial recovery in gross margin. The company's operating costs grew by only approximately 3.5%, significantly lower than the revenue growth rate, driving the quarterly gross margin to about 41.5%, an improvement of roughly 13.7 percentage points from the previous year.
Gross Margin Leap is Key to Profit Surge
During the first quarter, Yangtze Optical Fibre achieved operating revenue of 3.695 billion yuan, up 27.70% year-on-year. Operating costs were 2.161 billion yuan, increasing by only about 3.5%. This significant divergence between revenue and cost growth directly led to a major expansion in gross profit. Based on the financial report, the company's gross profit for the quarter was approximately 1.534 billion yuan, with a gross margin of about 41.5%. This compares to a gross profit of about 806 million yuan and a gross margin of approximately 27.8% in the same period last year. This implies a year-on-year gross margin improvement of about 13.7 percentage points, representing the most crucial change on the quarterly income statement. Driven by the higher gross margin, the company's operating profit reached 707 million yuan, compared to 119 million yuan a year earlier. Total profit was 703 million yuan, a year-on-year increase of 282.06%. Net profit attributable to shareholders was 495 million yuan, up 226.40%. The net profit margin attributable to shareholders for the quarter was about 13.4%, a significant improvement from approximately 5.2% in the prior-year period, indicating enhanced profitability. It is important to note that the quarterly report did not disclose segmented business revenue, price, volume, or product mix changes. Therefore, the specific sources of the gross margin improvement await more complete disclosures in subsequent reports. Nevertheless, the financial results clearly show a marked recovery in the core profitability of the company's main operations in the first quarter.
Adjusted Net Profit Nears Tenfold Increase, Signaling Improved Profit Quality
Compared to the 226.40% growth in net profit attributable to shareholders, the growth in adjusted net profit was even more pronounced. In the first quarter, the company's adjusted net profit attributable to shareholders was 461 million yuan, a staggering increase of 966.44% year-on-year. The adjusted net profit margin was about 12.5%, compared to just 1.5% in the same period last year. This indicates that even after excluding non-recurring items such as government grants and fair value changes of financial assets, the company's core profit still experienced substantial growth. Regarding non-recurring gains and losses, the total for the quarter was 33.91 million yuan, primarily consisting of: * Government grants of 41.23 million yuan; * Gains and losses related to the fair value changes and disposals of financial assets and liabilities of 11.97 million yuan; * Losses on disposal of non-current assets of -0.62 million yuan; * Other non-operating income and expenses of -4.65 million yuan; * The combined impact of income tax and minority interests was approximately 14.02 million yuan.
In terms of proportion, non-recurring items accounted for about 6.9% of the net profit attributable to shareholders this quarter, representing a limited contribution. In contrast, for the same period last year, net profit attributable to shareholders was 152 million yuan while adjusted net profit was 43.25 million yuan, a difference exceeding 100 million yuan, indicating a greater influence from non-recurring factors. This is a noteworthy aspect of this quarterly report: Yangtze Optical Fibre's profit growth is not primarily reliant on one-off gains but is reflected in the simultaneous improvement of both core gross profit and adjusted profit.
Overall Expenses Under Control, Notable Increase in Finance Costs
Looking at expenses, the company's total selling, administrative, R&D, and finance expenses for the quarter were approximately 747 million yuan, a year-on-year increase of about 23.8%, which is lower than the revenue growth rate. The period expense ratio was about 20.2%, slightly down from approximately 20.8% a year earlier. A breakdown shows: * Selling expenses were 161 million yuan, up about 39.9% year-on-year, with an expense ratio of about 4.35%, higher than the previous year's 3.97%. * Administrative expenses were 302 million yuan, increasing about 13.1% year-on-year, with the expense ratio dropping to about 8.16% from approximately 9.22% a year earlier. * R&D expenses were 205 million yuan, up about 16.6% year-on-year, with an expense ratio of about 5.56%, lower than the 6.09% recorded a year ago. * Finance costs were 79.08 million yuan, increasing about 74.6% year-on-year, with an expense ratio of 2.14%, up from 1.56% in the prior-year period.
The significant increase in finance costs warrants attention. The financial report shows that interest expense for the quarter was 63.67 million yuan, largely similar to the 62.69 million yuan a year ago. Interest income was 30.56 million yuan, showing a clear increase year-on-year. Therefore, the rise in finance costs might also be influenced by exchange rate factors or other financial items, although the quarterly report does not provide further details. Regarding R&D investment, the company spent over 200 million yuan on R&D in the quarter, maintaining a certain level of investment intensity. Although the R&D expense ratio decreased year-on-year, this was primarily due to faster revenue growth, as the absolute amount continued to increase.
Investment Losses Continue to Drag, Income Tax Expense Rises Significantly
On the income statement, investment income remained a drag. The company reported an investment loss of 75.44 million yuan for the quarter, compared to a loss of 56.24 million yuan a year earlier, representing an expanded loss of about 19.20 million yuan. Losses from investments in associates and joint ventures were 77.89 million yuan, compared to 67.69 million yuan a year ago, remaining the primary source of the drag. In terms of other income, the company recognized 78.41 million yuan in the quarter, up about 58.3% from 49.53 million yuan a year earlier, providing some boost to profits. Gains from fair value changes were 8.71 million yuan, compared to 2.34 million yuan a year ago. Regarding impairments, credit impairment losses were 44.04 million yuan, widening from 29.49 million yuan a year earlier. Asset impairment losses were 10.95 million yuan, narrowing from 26.69 million yuan a year ago. Combined, these two items had a negative impact on profit of approximately 55 million yuan. For income tax expense, the amount was 117 million yuan in the quarter, a sharp increase from just 6.70 million yuan a year ago. As total profit surged significantly, the company's effective tax rate rose to about 16.7%, compared to 3.6% in the prior-year period. This also implies that the growth in pre-tax profit this quarter was strong enough to deliver net profit growth even after covering the higher tax burden.
Operating Cash Flow Outperforms Profit, Investment and Debt Repayment Reduce Cash
Cash flow was another highlight of the quarter. In the first quarter, cash inflows from operating activities were 4.477 billion yuan, a year-on-year increase of about 29.6%. Within this, cash received from selling goods and providing services was 4.221 billion yuan, up about 33.4% year-on-year. Cash outflows from operating activities were 3.859 billion yuan, an increase of about 27.8% year-on-year. Ultimately, the net cash flow from operating activities was 618 million yuan, growing 41.85% year-on-year. This net operating cash flow not only exceeded the figure from the same period last year but was also higher than the current period's net profit attributable to shareholders of 495 million yuan, indicating good quality of profit realization. However, the closing balance of cash and cash equivalents was 5.409 billion yuan, a decrease of 222 million yuan from the beginning of the period, mainly affected by three factors: * Net cash flow from investing activities was -510 million yuan, primarily including 336 million yuan paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets, and 2.473 billion yuan paid for investments. * Net cash flow from financing activities was -290 million yuan. This included 1.512 billion yuan from obtaining borrowings and 1.747 billion yuan used for debt repayment, indicating a net debt repayment position. * The effect of exchange rate changes on cash and cash equivalents was -39.61 million yuan.
Structurally, the operating segment contributed cash, but investing activities and debt repayment consumed cash. At the period-end, the company still held monetary funds of 5.525 billion yuan, maintaining a high level of cash reserves.
Inventory Rises, Accounts Receivable Remain Stable
Regarding working capital, several items are noteworthy. At the end of the first quarter, accounts receivable stood at 5.906 billion yuan, slightly down from 5.950 billion yuan at the end of the previous year. Against the backdrop of nearly 30% revenue growth, accounts receivable did not expand correspondingly, which aligns with the improvement in operating cash flow. In terms of inventory, the closing balance was 3.504 billion yuan, an increase of about 11.1% from 3.153 billion yuan at the end of the previous year. The rise in inventory could be related to stockpiling, order fulfillment timing, or capacity arrangements, although the quarterly report does not provide more detailed reasons. Future monitoring will be needed to see if the inventory growth can be smoothly converted into revenue and whether there is any impairment pressure. Additionally, financial assets at fair value through profit or loss increased to 1.909 billion yuan from 1.683 billion yuan at the end of the previous year. Investments in other equity instruments decreased to 503 million yuan from 571 million yuan, corresponding to the negative "fair value change of investments in other equity instruments" reported in other comprehensive income for the period.
Other Comprehensive Income Turns Negative, Weighed Down by Exchange Rate and Equity Investment Fluctuations
Despite the substantial growth in net profit, the company's other comprehensive income for the quarter was -129 million yuan, compared to +12.12 million yuan a year ago. Affected by this, the total comprehensive income for the period was 456 million yuan, lower than the current period's net profit of 585 million yuan. Other comprehensive income attributable to owners of the parent company was -112 million yuan, mainly including: * Fair value changes of investments in other equity instruments: -55.95 million yuan. * Cash flow hedging reserve: -15.46 million yuan. * Exchange differences on translation of foreign financial statements: -39.13 million yuan.
This reflects the impact of market and exchange rate fluctuations on the company's equity investment fair values, hedging instruments, and foreign currency translation. For a company with overseas operations and financial asset allocations, subsequent comprehensive income may continue to fluctuate with market conditions.
Stable Shareholder Structure, Employee Shareholding Plan Enters Top Ten
As of the end of the first quarter, the total number of ordinary shareholders was 66,203. Among the top ten shareholders, HKSCC Nominees Limited held 421 million shares, representing 50.91%. These holdings consist of the company's overseas listed foreign shares and include some H-share holdings. China Huaxin Post & Telecommunication Economy Development Center held 180 million shares, accounting for 21.72%. Wuhan Yangtze Communications Industry Group Co., Ltd. held 119 million shares, representing 14.35%. Furthermore, Harvest International Capital Management Limited, CPE Aspen Investment Limited, and E Fund Management Co., Ltd. held 3.26%, 3.02%, and 2.58% respectively. The company's 2025 employee shareholding plan held 6 million shares, accounting for 0.72%, ranking among the top ten shareholders. The financial report indicates that none of the shares held by the top ten shareholders were pledged, marked, or frozen. The top ten shareholders and the top ten holders of unrestricted tradable shares did not participate in securities lending businesses.
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