Amid a joint rally in the KOSPI and KOSDAQ markets, Daehan Optical Communication showed strong performance. This was driven by improved overall market investment sentiment and renewed attention to a previously secured supply contract for optical cables for U.S. AI data centers.

Background for Stock Market Rally... U.S.-Iran Negotiation Expectations and Oil Price Decline

On the 4th, both the KOSPI and KOSDAQ recorded gains in the domestic stock market. It is analyzed that expectations for an easing of Middle East tensions, as possibilities for negotiations between the United States and Iran were raised, increased the preference for risk assets.

However, whether negotiations will proceed remains uncertain. According to Reuters, President Trump stated that U.S.-Iran negotiations were underway, but the Iranian Ministry of Foreign Affairs denied direct talks. The Iranian side stated that it is discussing the issue of vessel transit through the Strait of Hormuz with Oman. As the possibility of an agreement centered on mediating countries such as Qatar, Oman, and Pakistan was raised, international oil prices temporarily fell sharply. Reuters reported that the prices of Brent crude and West Texas Intermediate (WTI) each dropped by about 4%.

Nevertheless, the easing of tensions is not confirmed due to conflicting statements from both the U.S. and Iran. It is also reported that vessel traffic through the Strait of Hormuz falls significantly short of peacetime levels.

Key Catalyst for Daehan Optical Communication: North American AI Data Center Optical Cable Order

The direct business catalyst for Daehan Optical Communication is its track record of supplying ultra-high-density optical cables for U.S. hyperscale AI data centers. According to a Newsprime report, Daehan Optical Communication signed a second supply contract for 864-core ultra-high-density optical cables on June 16 of this year. The contract规模 is USD 23.68 million (approximately KRW 35.5 billion).

This is not a new order announced today, but rather an existing contract revealed about two months ago. Therefore, it is more accurate to interpret this as an order track record demonstrating Daehan Optical Communication's foundation in the North American AI infrastructure business, rather than a new catalyst for the day's stock price increase.

In February of this year, the company also secured the first supply contract (USD 3.78 million / approximately KRW 5.6 billion). The cumulative supply volume from the first and second contracts amounts to USD 27.44 million (approximately KRW 41.1 billion). Product supply is scheduled to take place from July 2026 to the end of 2027, and the entire contract amount will not be reflected as revenue at once; instead, it is likely to be recognized over several quarters according to the production, shipment, and inspection schedules.

Supplied Through TFO America... Entirely Produced Domestically

This contract is executed through TFO America, the U.S. local subsidiary of Daehan Optical Communication. The company stated that the 864-core optical cables will be entirely manufactured at its domestic production base and supplied to the North American region.

AI data centers must process large amounts of data in real time between numerous graphics processing units (GPUs) and servers. As the scale of data centers grows, the importance of ultra-high-density optical cables, which can maximize transmission capacity in a limited space, also increases.

Daehan Optical Communication has established an integrated production system ranging from optical fiber preforms to optical fibers and finished optical cables. In addition to optical cables for communication, it also produces optical ground wires (OPGW) for power grids.

Order Does Not Equal Earnings Improvement... Further Verification Needed

Experts point out that one should not conclude earnings improvement based solely on past order volumes. The actual revenue recognition speed of the contracted volume, manufacturing costs, profitability, and the possibility of additional orders must be comprehensively verified.

In particular, since Daehan Optical Communication has recorded operating losses up to the most recent fiscal year, the key point is whether the supply to North American AI data centers actually leads to revenue growth and a reduction in losses. The order amount and the contribution to operating profit are separate concepts.

Future points of interest include whether the supply scheduled until the end of 2027 proceeds as planned, whether the North American AI data center customer base expands, and whether the related revenue is actually reflected in quarterly earnings. The joint rally in the KOSPI and KOSDAQ on this day and the expectations for U.S.-Iran negotiations merely explain the broader market sentiment. An individual business evaluation of Daehan Optical Communication should be approached with a focus on the fulfillment of optical cable contracts and additional order trends, rather than the Middle East situation.

[The responsibility for investment decisions lies with the investor, and the content included in this article is not investment advice. This article was written with AI assistance.]