Key investment points
Event: on] March 5, 2022, the fifth session of the 13th National People’s Congress opened at the Great Hall of the people in Beijing. Premier Li Keqiang delivered a government work report. The meeting recalled that in 2021, China’s innovation capacity was further strengthened, enterprise R & D funds increased by 15.5%, and the integration of digital economy and real economy accelerated. Looking forward to 2022, we will focus on digital economy, industrial Internet, offshore wind power and other fields. The work report proposes to promote the development of digital economy and promote the large-scale application of 5g; Accelerate the development of industrial Internet and cultivate and expand digital industry; Orderly promote carbon peak and carbon neutralization, and promote the planning and construction of large-scale scenery bases. In addition, the report also proposes to strengthen the incentive for enterprise innovation, strengthen the implementation of the policy of adding and deducting R & D expenses, and increase the proportion of adding and deducting scientific and technological small and medium-sized enterprises from 75% to 100%. The preferential income tax policies for high-tech enterprises will continue to promote the R & D and innovation of scientific and technological enterprises.
Digital technology accelerates the integration of the real economy, and 5g communication enables the overall layout of Digital China. The government work report proposes to strengthen the overall layout of Digital China Construction, build digital information infrastructure, promote 5g large-scale application, promote industrial digital transformation, and develop smart cities and digital villages in 2022. Combined with the digital economy development plan of the 14th five year plan, the added value of China’s digital economy industry will account for 10% of GDP in 2025. At present, China has built and opened more than 14250005g base stations and 520 million 5g mobile terminal connections. The Ministry of industry and information technology predicts that 2022 will be a key year for the large-scale application of 5g, with more than Shanghai Pudong Development Bank Co.Ltd(600000) new 5g base stations and 2 million 5g base stations by the end of the year. We believe that communication is one of the core bases for the development of digital economy. As a new infrastructure, 5g base station construction is moderately advanced, laying the foundation for the overall layout of Digital China construction.
The popularization of industrial Internet has accelerated, driving the digital transformation of enterprises. The report mentioned accelerating the development of industrial Internet, cultivating and expanding digital industries such as integrated circuits and artificial intelligence, and improving the innovation and supply capacity of key software and hardware technologies. During the 14th Five Year Plan period, the scale of China National Software And Service Company Limited(600536) and information technology service industry is expected to increase by 71.6% to 14 trillion, and the application penetration rate of industrial Internet platform is planned to increase from 14.7% to 45%. We believe that the industrial Internet is an important application scenario of 5g technology and an important driving force to promote the construction of digital economy.
The “double carbon” policy has been promoted in an orderly manner, and the certainty of offshore wind power is high. The report points out that we should orderly promote carbon neutralization and implement the action plan for carbon peaking. The construction of large-scale power grid and its supporting capacity should be promoted, among which the construction of renewable power grid should be emphasized. With the decline of wind turbine prices, offshore wind power has achieved parity. As a key link of offshore wind power, submarine cable has high competitive barriers and strong certainty. With the gradual implementation of offshore wind bidding in 2022, we believe that relevant submarine cable companies are expected to continue to benefit.
Investment suggestions: we believe that the digital economy, industrial Internet and offshore wind power mentioned in the government work report are the priorities of the government’s work in 2022. It is suggested to pay attention to submarine cables: Jiangsu Zhongtian Technology Co.Ltd(600522) , Hengtong Optic-Electric Co.Ltd(600487) ; Operators: China Mobile, China Telecom Corporation Limited(601728) , China United Network Communications Limited(600050) ; Equipment manufacturer: Zte Corporation(000063) , Fiberhome Telecommunication Technologies Co.Ltd(600498) ; Optical module: Zhongji Innolight Co.Ltd(300308) , Eoptolink Technology Inc.Ltd(300502) , Accelink Technologies Co.Ltd(002281) , Henan Shijia Photons Technology Co.Ltd(688313) , Suzhou Tfc Optical Communication Co.Ltd(300394) ; IDC： Guangdong Aofei Data Technology Co.Ltd(300738) Shanghai Athub Co.Ltd(603881) ； Internet of things: chuangyao technology, Quectel Wireless Solutions Co.Ltd(603236) , Espressif Systems (Shanghai) Co.Ltd(688018) , Meig Smart Technology Co.Ltd(002881) , Queclink Wireless Solutions Co.Ltd(300590) , Fibocom Wireless Inc(300638) ; Sensors: Hanwei Electronics Group Corporation(300007) , Cubic Sensor And Instrument Co.Ltd(688665) ; Industrial Internet: Shanghai Baosight Software Co.Ltd(600845) , 3Onedata Co.Ltd(688618) , Beijing Inhand Networks Technology Co.Ltd(688080) ; Power Internet of things: Leaguer (Shenzhen) Microelectronics Corp(688589) , Willfar Information Technology Co.Ltd(688100) ; Satellite communication: Shanghai Huace Navigation Technology Ltd(300627) , Guangzhou Haige Communications Group Incorporated Company(002465) , China Satellite Communications Co.Ltd(601698) , China Spacesat Co.Ltd(600118) , etc.
Risk tip: Sino US trade friction risk; Covid-19 epidemic recurrence risk; Industry competition intensifies risks, etc.
