Industry core view:
The last trading week was the eleventh trading week of A-Shares in 2022. The Shanghai and Shenzhen 300 index fell 2.14%, and 10 of the 31 industries in Shenwan class rose and 21 fell. The overall trend of the communication industry was stronger than the market last week, down 1.48%, ranking 18th and second in the TMT industry. On March 22, 2022, the Zte Corporation(000063) five-year compliance monitoring period ends. The U.S. Federal District Court for the Northern District of Texas ruled that Zte Corporation(000063) ‘s probation expired without any penalty, and confirmed that the term of office of the inspector would end on March 22, 2022. The origin of the “five-year compliance observation period” can be traced back to March 7, 2016. The Bureau of industry and security (BIS) of the U.S. Department of Commerce listed Zte Corporation(000063) and its subsidiaries in the “entity list” on the grounds of violating U.S. export control regulations and took export restriction measures against them. It is worth mentioning that the “five-year compliance observation period” lifted by Zte Corporation(000063) is the probation period of the U.S. Department of justice for the company, which does not mean the complete lifting of relevant risks. At present, Zte Corporation(000063) still has a 10-year supervision period of the company by the U.S. Department of Commerce, which lasts from 2018 to 2028. We believe that this incident reflects the easing of sanctions and conflicts between China and the United States in it, CT and other fields. From the perspective of fundamental performance, Chinese communication enterprises such as Huawei and ZTE have made rapid progress in technology in recent years, and their market share has increased year by year. With the easing of China US relations, these enterprises may have more room to play in overseas markets. However, in the short term, the technology trade relationship between China and the United States may not return to the state before 2018. We still need to pay attention to the performance uncertainty brought by overseas policies to the communication industry.
Key investment points:
One week’s industrial news: (1) Ministry of industry and information technology: in the first two months, China Telecom Corporation Limited(601728) business revenue totaled 258.6 billion yuan, with a year-on-year increase of 9%; (2) The downlink rate exceeds 100Mbps. Can Starlink really replace 5g?; (3) 5g urgently needs to create “killer” applications; (4) China Telecom Corporation Limited(601728) beech: p-ran is expected to solve the problem of 6G low-cost coverage; (5) Yang Jie of China Mobile: strictly control CAPEX and spend every dollar on the blade; (6) Revenue 24.2 billion yuan, an increase of 114%! The financial report of mobile cloud 2021 reached a new high; (7) Zte Corporation(000063) five year compliance monitoring period ends; (8) FCC of the United States listed China Telecom Corporation Limited(601728) and relevant subsidiaries of China Mobile in the “security threat list”.
Investment suggestions:
With the gradual advancement of 5g construction and the continuous high growth of cloud computing construction scale, the fundamentals of the communication industry may continue to improve in 2022. In terms of 5g construction, with the implementation of the “14th five year plan” for the development of information and communication industry, the goal of 5g construction in the future is clear. In the next three to five years, 5g construction will also maintain a stable pace of construction investment. However, with the gradual progress of construction, the downstream supporting applications will gradually mature, thus driving the relevant construction of 5g again.
We suggest paying attention to four investment tracks in the communication industry: (1) operators & equipment manufacturers: 5g construction continues to promote, and the prosperity of traditional communication services is rising. With the expansion of 5g construction, the performance of communication construction and operation and maintenance industrial chain has increased significantly, and the cloud network construction of data center and 5g2b business also opens new growth space for operators & communication equipment manufacturers. (2) Optical module: with a new round of demand growth and the promotion of optical module technology, the industry is expected to usher in a new round of double clicking in 2022. It is suggested to pay attention to the leading optical module enterprises on the digital communication side. (3) Internet of things module: in the next two years, the Internet of vehicles module will still be one of the main directions of the future market growth of the Internet of things module. It is suggested to pay attention to the leading enterprises with deep layout in the Internet of vehicles industrial chain. (4) It is suggested that enterprises should pay attention to the original temperature control technology of liquid energy storage center.
Risk factors: increased trade friction, China’s 5g construction does not meet expectations, the slowdown of global cloud computing construction, and the price fluctuation of upstream raw materials.
