Economic Observer reporter Zheng Chenye
For investors in "Yi Zhongtian," this October has not been easy at all. As stock prices continued to decline, the third-quarter reports for 2026 released by three companies on October 28th and 29th mostly fell short of market expectations.
Among them, Xinyisheng (300502. SZ) saw a decline in both revenue and net profit in the third quarter compared to the previous quarter, which was seen by the market as a 'blowout'. One of the reasons given by Xinyisheng for this was the floods in Thailand.
On October 29th, Tianfu Communication (300394. SZ) experienced a limit-down during trading, closing down 19.77%. On the same day, Xinyisheng and Zhongji Xuchuang (300308. SZ) also fell by 11.06% and 8.53%, respectively. As of the close of trading that day, Xinyisheng's stock price had accumulated a decline of over 40% since October.
According to public information, Xinyisheng's revenue in the third quarter was 10.94 billion yuan, a decrease of 12.98% from the previous quarter; its net profit attributable to the parent company was 3.843 billion yuan, a decrease of 19.07% from the previous quarter. Among the three companies "Yizhongtian," it is the only one that saw a decline in revenue from the previous quarter. Wang Cheng, the company's deputy general manager and secretary of the board of directors, stated at a performance briefing on the evening of October 29th that there were some issues with the supply chain in the third quarter, and the picking-up pace of some customers also changed. In addition, after floods occurred in Thailand, some shipments were delayed at the airport and customs clearance stages, and were not sent out until early October, thus the revenue could not be recognized in the third quarter.
It's not just Xinyisheng that claims to have been affected by the floods in Thailand. Wang Xiaoli, Vice President and Chief Financial Officer of Zhongji Xuchuang, also stated during a Q3 earnings conference call that the shipment of finished products from the Thai factory in the last week of September was delayed due to the floods, and all of this goods were dispatched at the beginning of October.
Public information shows that Zhongji Xuchuang's revenue in the third quarter still reached 27.769 billion yuan, a month-on-month increase of 24.62%; during the same period, Tianfu Communication's revenue was 1.923 billion yuan, with a month-on-month increase of about 28%.
Regarding downstream demand, Zhongji Xuchuang and Xinyisheng remain very optimistic. Wang Jun, vice president of Zhongji Xuchuang and secretary of the board of directors, stated that orders from major customers have basically covered the entire year of 2027, and there is currently no sign of customers canceling orders or revising their demand forecasts. Wang Cheng also mentioned that there has been no change in industry trends in the third quarter, and the order delivery requirements for next year are expected to increase significantly compared to this year.
When explaining their third-quarter performance, all three companies mentioned constraints on upstream materials. Among them, the management of Xinyisheng explicitly stated that a shortage of raw materials affected production and delivery during the third quarter.
"The main impact is on logistics."
Thailand is one of the main production bases for China's optical module industry chain overseas, with many enterprises in the upstream and downstream sectors setting up factories there. "Yizhongtian" also has three mass-production factories in Thailand, and some of their products are directly shipped to overseas customers from Thailand. Therefore, the logistics situation in Thailand is directly related to their shipment capabilities.
According to public information, heavy rainfall occurred in various parts of Thailand in late September, and on September 26, Bangkok declared all 50 of its districts as flood-stricken areas. During the flood period, although Suvarnabhumi Airport remained open, many ground staff members of Thai International Air Lines (Thai Airways) were unable to report for duty. Starting from September 30, the airport's cargo handling was temporarily suspended due to a shortage of personnel, and the processing of goods at the airport also slowed down due to the same reason.
According to Wang Cheng's presentation at the aforementioned performance meeting, Xinyisheng’s factories in Chengdu and Thailand have a division of labor, with logistics operations occurring between the two locations. The Thai factory is primarily responsible for the work from the completion of production to the shipment stage. He stated that this flood did not affect Xinyisheng’s production or cause any damage to the goods, “The main impact was on logistics.” A portion of the products that were scheduled to be shipped in large quantities by the end of September were not able to be dispatched, nor were they able to complete the customs clearance for export.
At the conference, an investor asked: Since there is also considerable production capacity of our peers in Thailand, why was the impact of the floods on Xinyisheng so significant? In response, Wang Cheng explained that late September is usually the period when Xinyisheng concentrates its shipments, and the floods coincided with this time frame, which is why the impact was particularly severe.
The reason why shipment delays affect quarterly revenue is related to the timing of revenue recognition. Wang Cheng explained that New Yisheng's sales involve several methods, such as sending goods to consignment warehouses, dispatching them, and going through customs clearance. The timing of revenue recognition varies for each method. If the goods are not dispatched on time or the customs clearance is not completed, the corresponding revenue recognition will be postponed.
Wang Cheng stated that some major customers adopt a consignment storage method, where the products are first sent to the warehouse, and revenue is recognized only when the customers pick them up. Wang Cheng mentioned that during the third quarter, there was a period when the pace of product pickup by some customers slowed down. This factor, combined with issues on the shipping side, ultimately affected the company's revenue for that quarter. Lin Xiaofeng, a director and chief financial officer at Xinyisheng, noted that the overall demand from customers is continuously rising, and it is normal for the pace of pickup to vary from month to month.
So, how much is the amount of revenue that has been postponed? Regarding this, Xinyisheng did not provide a specific figure at the conference, but the data from the third-quarter report shows that the company's inventory value at the end of September was 17.413 billion yuan, which is an increase of 5.757 billion yuan compared to the end of June.
Lin Xiaofeng stated that about half of the increased inventory consists of goods in stock, which can generate revenue quite quickly. 'If this portion is included, the revenue level for the third quarter might not show the current downward trend.' According to her, most of the inventory that was accumulated by the end of September had its revenue recognized in October.
In terms of inventory, at the end of September, Zhongji Xuchuang's inventory amounted to 23.878 billion yuan, an increase of 4.052 billion yuan from the end of June. Wang Xiaoli believes that the floods in Thailand had a limited impact on Zhongji Xuchuang and were merely a "temporal difference" for revenue. The increased inventory due to the floods was "not that significant," and a considerable portion of it was raw materials prepared for subsequent orders.
Material locked in advance
In addition to the floods in Thailand, the supply of upstream materials also affects the delivery schedules of three companies.
When there is an ample supply of orders, the amount of goods that optical module manufacturers can deliver largely depends on how much upstream material they can obtain, and core materials need to be locked in advance. Wang Cheng stated at a conference that this year, the supply of raw materials has been very tight, and this is not limited to just one type. With the rapid growth in optical module orders, the lead time for stocking up on core raw materials has been extending, with some exceeding six months and even reaching up to a year.
At the exchange meetings between New Yisheng and Zhongji Xuchuang, DSP (digital signal processing chips, the core chips that process electrical signals in high-speed optical modules) were materials that were asked about multiple times.
Wang Jun stated that DSP is a very critical material for optical modules, and currently, the supply is tight. Major customers are also involved in its control and distribution. In addition, due to the tight production capacity of advanced upstream manufacturing processes, the price of DSP is also relatively firm.
Wang Jun also stated that in the face of varying degrees of shortages in core materials, Zhongji Xuchuang managed to achieve relatively rapid revenue growth in the third quarter by actively preparing materials in advance, signing long-term agreements, making upfront payments, and introducing new suppliers, thus arranging for key materials in a timely manner.
As of the end of September, Zhongji Xuchuang's prepaid expenses amounted to 1.567 billion yuan, an increase of 1068.43% compared to the beginning of the year, mainly to secure upstream raw materials in advance to meet order deliveries; other non-current assets increased to 1.954 billion yuan, primarily due to prepaid payments for long-term material purchases to lock in upstream raw materials for the long term.
Wang Xiaoli also mentioned during the teleconference that in the second quarter of this year, Zhongji Xuchuang made concentrated payments for capital expenditures and material advances, which led to fluctuations in cash flow. However, by the third quarter, cash flow had returned to normal. Based on the data from the third-quarter report and the semi-annual report, Zhongji Xuchuang generated a net cash flow from operating activities of approximately 6.2 billion yuan in the third quarter alone.
The revenue growth of Tianfu Communication, a manufacturer of optical devices, in the third quarter is related to the improvement in material supply. During an investor relations event on October 28th, the company stated that the tight supply situation of core materials for its active optical devices (devices involving photoelectric conversion) in the third quarter had significantly eased, and the delivery rhythm was generally smooth. As a result, the delivery capacity of active optical devices improved, which drove revenue growth.
At the end of September, Tianfu Communications had inventory amounting to 1.274 billion yuan, an increase of 345 million yuan from the end of June. In response, the company stated that the increase in inventory was mainly due to strategic stockpiling, which involved making advance reserves of key raw materials for new technological routes such as CPO (total encapsulation optics).
The situation at Xinyisheng is different; their output in the third quarter was significantly affected by raw materials. When asked whether the lack of strong growth in production volume from quarter to quarter in the third quarter was related to a shortage of materials, Wang Cheng stated that this was one of the reasons, but it was also related to the distribution of orders. "To be honest, the raw material aspect did have a certain impact on our overall output and delivery in the third quarter," he said.
In response to the question of whether " DSP has dragged down shipments in the third quarter," Wang Cheng also stated that Xinyisheng did indeed encounter some issues with raw materials in the third quarter. For core components such as DSP, the lead time for procurement had significantly increased. According to him, the raw materials needed for the third quarter were ordered well in advance of that period, and there is considerable experience to be summarized in this regard, as well as areas that need improvement. The core raw materials required for next year are already in stock. Lin Xiaofeng also mentioned that Xinyisheng is quite proactive in stocking up on raw materials and semi-finished products, with the company's prepaid expenses increasing from 16.9587 million yuan at the beginning of the year to 1.322 billion yuan by the end of September, mainly for material payments in advance.
In addition to materials, delivery also depends on production capacity. After the floods, Thailand is still part of the expansion plans for all three companies. Wang Jun stated that Zhongji Xuchuang's main expansion plans are currently in Thailand and some other Southeast Asian regions; Wang Cheng also mentioned that Xinyisheng is expanding production simultaneously in Chengdu and Thailand; the management of Tianfu Communication indicated that the expansion plans in Suzhou, Jiangxi, and Thailand are progressing as scheduled.
(Author: Zheng Chenye)
