Event: China Telecom Corporation Limited(601728) group announced the centralized procurement results of outdoor optical cables (2021), and the procurement scale was 43 million core kilometers.
Our comments are as follows:
The bidding price continued to rise slightly better than expected, reflecting the continuous improvement of industry supply and demand and the upward boom
The content of this bidding procurement is the outdoor optical cable products required by China Telecom Corporation Limited(601728) Group Co., Ltd. China Telecom Corporation Limited(601728) and its subsidiaries and branches in 2022 (excluding the outdoor optical cable required for the construction of provincial-level optical cable line project), including gyta, GYTS, gydta, gydxtw and other types of outdoor optical cables. The bidding scale is 43 million core kilometers. Calculated by 13% value-added tax, the average bid price excluding tax is expected to be about 72.4 yuan / core kilometers, about 12% higher than the previous price of 64.9 yuan. The price of optical cable has further increased, reflecting the upward boom of the industry and the continuous improvement of the supply and demand structure. We believe that the rise in the price of optical cables will lay a solid foundation for the high elasticity of the performance of optical cables this year.
The share of the top manufacturers is higher, and the bid winning price is higher, and the share of Zhongtian Hengtong is in the lead
A total of 34 bidders participated in the bidding of the project, and the bid evaluation committee reviewed all submitted bidding documents in accordance with the comprehensive evaluation method specified in the bidding documents. After evaluation, 20 manufacturers including Zhongtian, Hengtong, Changfei, Futong and Fenghuo won the bid. From the result of winning the bid, the top five shares are Zhongtian, Hengtong, Changfei, Futong and Fenghuo, and the winning prices of the top five are also the highest. We believe that this result reflects that the centralized purchase of the industry restricts vicious competition, promotes benign development, and is conducive to the head manufacturers to obtain a high share.
In terms of the supply and demand structure of optical fiber and cable, the previous price decline led to the contraction & withdrawal of the production capacity of some optical rods, while the demand continued to grow rapidly, and the marginal supply and demand pattern is expected to continue to improve
1) supply side: China's last round of new production capacity release of polished rods is coming to an end, and prices continue to fall under pressure, and small and medium-sized production capacity is expected to withdraw; 2) Demand side: looking to the future, a new round of high traffic growth cycle driven by 5g / Cloud Computing / Internet of things / AI will drive a new round of prosperity in optical fiber demand. In the future, the relationship between supply and demand will be gradually improved, and the industry is expected to enter a new round of prosperity cycle.
Infrastructure construction needs to be moderately advanced, and the optical fiber and cable industry is expected to continue to pick up
Vice Premier Liu he pointed out that "infrastructure construction should be carried out moderately in advance", including Miao Wei, former Minister of the Ministry of industry and information technology, who pointed out that "a moderately first strategy should be adopted in the construction of communication infrastructure". We believe that optical fiber and cable, as an important bearing pipeline of communication infrastructure, the industry demand is expected to continue to pick up, and the profit reversal inflection point of the main listed leading optical fiber and cable business is expected to be established.
Focus on: Jiangsu Zhongtian Technology Co.Ltd(600522) (14 times in 22 years), Hengtong Optic-Electric Co.Ltd(600487) (12 times in 22 years). It is suggested to focus on: Yangtze Optical Fibre And Cable Joint Stock Limited Company(601869) (a + H), etc.
Risk tips: uncertain risk of epidemic situation, risk of price rise of raw materials, lower than expected capital expenditure of operators and higher than expected industry competition
