Company Profile

Hengtong Optic-electric Co., Ltd. (600847: SH) manufactures and distributes opticalfiber and optical cables.

Event

Hengtong Optic-electric (the company) announced recently that it has won bid for acontract of submarine optical cables and related products, with total value of CNY 75million.

Investment Highlight

The company receives higher-than-expected submarine optical cable orders,indicating its potential to accelerate businesses in military sector and overseasmarket. Submarine optical cable manufacturing has relatively high barrier to entry dueto the high technology requirement (Generally, submarine optical cables will be buriedunder the seabed for more than 10 years. Although the company’s submarine cablebusiness started late, it has achieved faster-than-peer progress. We believe that thereceipt of CNY 75 million submarine optical cable orders marks a breakthroughfor the company.

1. The company has already been equipped with sophisticated techniques toproduce submarine cables. The company is quickly catching up with theindustry leaders. The company has obtained the UQJ and TLC certificates. Boastingcompetitive strengths in manufacturing of submarine cables, the company has alreadyoutpaced many domestic counterparts and is catching up with the industry leader.

2. The receipt of the submarine cable order marks the company’s first stepventuring into the military equipment market. After years of hard work, thecompany is actively making breakthroughs in the submarine cable market and hadreceived quite a few orders from domestic players by the end of last year. The receiptof the submarine cable order marks the company’s first step venturing into the militaryequipment market. We believe the company will be able to secure more orders fromthe military equipment sector.