Research Report Express -- 2.5

Research report direct access channel -- 2.5

I. Market Overview [Taogu Ba]

On February 5th, the A-share market experienced a volatile decline, with all three major indices pulling back. By the close, the Shanghai Composite Index fell 0.64% to 4,075 points, the Shenzhen Component Index dropped 1.44%, and the ChiNext Index declined 1.55%. The total trading volume across both markets was 2.18 trillion yuan, shrinking by over 300 billion compared to yesterday. Throughout the day, 1,618 stocks rose, while 3,719 declined.

Commodity markets remain a key short-term factor influencing prices. From today’s market data, in an environment of reduced trading volume, funds are temporarily favoring more defensive sectors with lower volatility to reduce drawdowns. If external commodity fluctuations significantly stabilize and trading volume resumes, the market is expected to gradually shift from defensive dominance to sector rotation and recovery.

II. Thoughts on T and S Photovoltaic Chains: Energy is China’s Business Card; Going Global is the Key to Breaking the Inner Loop

T and S are entirely separate groups, so their approaches to supplier selection differ. 1. Regarding T - Ground Equipment, the biggest recent change is the authorization of Topcon technology.
First, T’s financial reports show doubled capital expenditure, with the underlying logic in new energy not only relying on IRA subsidies but also on the firm belief that #electricity is the core of data centers. T already has significant advantages in energy storage, filling the gaps in photovoltaic technology, and occupying the high ground in energy.
Second, this leads to rapid volume growth capacity (e.g., 100 GW in a year and a half), essentially because there is a window of opportunity due to electricity shortages. Merely purchasing equipment from Chinese companies cannot meet the demand for fast production ramp-up.
Third, Topcon’s most numerous patents globally are still JK (after buying out from Korea, they further licensed to TH, JA, etc.). The recent praise from Elon Musk and T’s visit to Shanxi model sites are all for JK production lines, and future cooperation is worth期待. Essentially, #new demand, new markets + patent licensing help everyone break the inner loop; going global is the greatest victory.
How to price? Based on North American market prices of $35,000 per 1W, with a net profit of 1 RMB/W, the profit space for 100 GW is 100 billion RMB. The share of technology licensing within this remains to be patiently observed.
Some investors also wonder if TH and JA can also adopt this logic, leading to internal competition? Will T consider this? I don’t know. Anyway, A-share investors always think ahead of the game and are more competitive. #For stocks, we believe the sector will be revalued, and currently, JK is the best positioned, the first to be revalued (the market’s initial recognition).
Fourth, does this logic risk equipment damage? No, it’s worth considering the cooperation issues between C and F in North America. Currently, we believe #the dominance of equipment lies with T, which relies on patents, the most advanced equipment, and comprehensive solutions, rather than secondary market cheap second-hand equipment. From a materials perspective, JK’s more membrane-based is FST, and more silver paste-based is DK.

2. Regarding S - Space, the biggest recent change is to look beyond S and focus on the butterfly effect. Yesterday, we discussed two equipment companies, one of whose chairmen said, “Not sure if influenced by Director Ma, next week they will host several groups of American clients, all major companies and leaders.” We see that Google launched the “Hunter Program” in November 2025, collaborating with Planet Labs to launch AI satellites equipped with self-developed TPU chips, building a scalable distributed space data center. Subsequently, #we are also paying attention to S leading a new round of arms race, and the logic of equipment is far from complete.
   Finally, we want to emphasize: T and S differ significantly in approach, but the core purpose is the same—North America faces electricity shortages, and chain leaders occupy the high ground in quality energy resources.
   Therefore, we continue to be optimistic about the large industry logic of electricity shortages + Chinese energy going overseas. Energy forms are diverse, and Chinese A-share companies that cannot lead in energy segments for overseas expansion are opportunities for revaluation given the times.

III. Fiber Optic Cable Sector to Enter a Super Cycle

1. Fiber optic prices are still rising rapidly. The 657 A2 price is already over 100 RMB per km per core, and 652D fibers exceed 60 RMB per km, with daily price fluctuations, unprecedented in history.
2. The four major domestic manufacturers have fully utilized their capacity; under extreme conditions, capacity can be expanded by an additional 10-15% through process squeezing.
3. Leading three domestic operators’ fiber optic cable share in 2025 is generally below 40% of total fiber optic revenue, with one below 25%. Based on current conditions, we make the following inferences:

1. Operator demand will exceed actual supply. In the last procurement, China Unicom’s 65.78 million core km price was mostly won by small and medium enterprises at low prices, currently well below cost, likely leading to significant defaults, and China Unicom may have to re-tender. The US Bead project will also continue to drive fiber optic demand.
2. Drone demand has exceeded expectations and is insensitive to some factors. Global drone fiber demand in 2025 is 50 million core km, expected to reach 80 million in 2026, but actual demand may be even higher.
3. AI demand has not yet significantly spilled over into China, but it is expected to be very fast and substantial. Corning, Toray, and Preformed’s fiber capacity was fully utilized by Q2 2025, after which they began purchasing from China gradually.
4. The current round of fiber prices will surpass historical highs and last longer.
   Regarding stock selection:
5. A new big cycle begins, and top companies must be chosen—Longi, Hengtong, Zhongtian.
6. Companies with expectations differences, capable of rapid capacity recovery or with low-cost Corning fiber supply: Tefa Information and Tongding Interconnection.