Core view
Market review in March: the valuation of the sector fell and lost the market. In March, the CSI 300 index fell 359 points or 7.8% in the whole month, and the communication (Shenwan) index fell 173 points or 8.2% in the whole month, underperforming the market and ranking 15th among the first-class industries of Shenwan. The valuation of the communication industry at the end of March was slightly lower than that at the end of February, which was lower than the historical median. In March, all sectors of the communication industry showed varying degrees of decline, including industrial Internet, visualization, optical devices, optical modules and other sectors, with a decline of more than 10%.
Huawei accelerated the adjustment of business structure and organizational structure, established ten new legions, and helped the digital transformation of the industry. The decline of Huawei’s revenue in 2021 is mainly due to the limited development of mobile phone and PC business. In the face of challenges, Huawei strengthened its R & D investment, actively carried out business transformation, adjusted its organizational model, and established a new top ten Corps. We believe that, on the one hand, the contraction of Huawei’s low gross margin businesses such as servers and mobile phones will reshape the competitive landscape; On the other hand, Huawei’s establishment of several major legions is expected to accelerate the development of industrial digital transformation and bring opportunities to relevant industrial chain partners. It is suggested to pay attention to Huawei’s industrial chain; In addition, starting from the new business and direction expanded by Huawei, we believe that there are investment opportunities in cloud infrastructure, Internet of things and cross-border innovation fields, such as “communication + energy” and “communication + automobile”.
Operators continue to make efforts to innovate business, and the development of Gigabit users is brilliant. In recent years, with the improvement of operators’ industry competition pattern, 5g application development and other favorable factors, China Telecom Corporation Limited(601728) business revenue growth has returned to the growth track. On the one hand, the industrial Internet business continued to maintain rapid growth, and the proportion of revenue continued to increase; On the other hand, traditional businesses benefited from the promotion of the dual Gigabit policy, especially the growth of 5g users and Gigabit network users. The business transformation of operators continues to advance. It is recommended to pay attention to the operator sector and focus on China Mobile.
Accelerate the recovery and green transformation of the digital energy industry chain, and pay attention to investment opportunities in all links. According to the latest data of IDC, the annual cloud infrastructure expenditure in 2021 totaled US $73.9 billion (+ 8.8%), which is expected to increase by 21.7% to US $90 billion in 2022. We are optimistic about the industrial chain investment opportunities brought by the recovery of cloud infrastructure. Green energy conservation has become the main direction of cloud infrastructure development. For example, the pue of new data centers in Shaoguan area shall not be higher than 1.25. In the context of green transformation, temperature control and power supply have become the focus of energy-saving transformation. It is suggested to pay attention to IDC enterprises with leading development ability of low-carbon and energy-saving data center and leading temperature control equipment manufacturers.
Investment suggestion: in April, focus on the direction of operators and industrial digitization. The fundamentals of operators continue to recover and improve, with valuation repair opportunities, focusing on China Mobile. In the direction of industrial digitization, we should focus on the track with high flexibility: first, the direction of policy overweight, with more catalysts, such as the Internet of things, Beidou and industrial Internet. Specifically, there are Internet of things modules (focusing on Quectel Wireless Solutions Co.Ltd(603236) , Fibocom Wireless Inc(300638) ), IOT chip ( Rockchip Electronics Co.Ltd(603893) ), industrial Internet gateway ( Beijing Inhand Networks Technology Co.Ltd(688080) , 3Onedata Co.Ltd(688618) ), Beidou application terminal ( Shanghai Huace Navigation Technology Ltd(300627) ). Second, the track combined with new energy and intelligent vehicles has high certainty and high valuation flexibility. Focus on “communication + energy” ( Jiangsu Zhongtian Technology Co.Ltd(600522) , Guangdong Shenling Environmental Systems Co.Ltd(301018) , Shenzhen Kstar Science & Technology Co.Ltd(002518) ) and “communication + automobile” ( Suzhou Recodeal Interconnect System Co.Ltd(688800) ).
The key recommended combinations in April 2022 are Quectel Wireless Solutions Co.Ltd(603236) , Yealink Network Technology Co.Ltd(300628) , Jiangsu Zhongtian Technology Co.Ltd(600522) , Guangdong Shenling Environmental Systems Co.Ltd(301018) , China Mobile and Suzhou Recodeal Interconnect System Co.Ltd(688800) .
Risk tips: the global epidemic intensifies the risk, 5g investment and construction is less than expected, Sino US trade friction, etc.
