This week, there was a correction in the communication sector, and operators and cloud video sub sectors performed better
Weekly market: this week, the Shanghai Composite Index rose 2.19%, the Shenzhen Component Index rose 1.29%, and the gem index rose 1.10%. In this week’s industry index, the communication sector fell by 0.96%; Among the individual stocks in the communication sector, the proportion of rising, maintaining and falling stocks was 20.77%, 4.62% and 74.61% respectively. In terms of the rise of individual stocks, Chutian Dragon Co.Ltd(003040) (+ 22.51%), Hangzhou Freely Communication Co.Ltd(603602) (+ 18.72%) and Unionman Technology Co.Ltd(688609) (+ 17.29%) were among the top three. In terms of sub sectors: according to our data on the division of sub sectors by companies in the communication industry, the relevant targets of cloud video sector and operator sector performed well this week, with an increase of 1.09% and 1.70% respectively.
We believe that with the continuous promotion of the construction of 5g base stations by China’s three major operators, the continuous accumulation and innovation of 5g applications, the rapid growth of 5g traffic is expected to accelerate, and the economic development of digital traffic is expected to exceed expectations, maintaining the “recommended” rating of the communication industry.
China has become the global leader in 5g applications, and operators continue to improve, creating economic growth outside China
GSMA released the report on China’s mobile economic development in 2022 this week. The report shows that in 2021, China added more than 285 million 5g connections, accounting for 75% of the global 5g connections. At present, it has ranked among the most developed mobile markets in the world. By 2025, the number of 5g connections in China will reach 892 million, and 5g will become the most mainstream mobile technology in the Chinese market. This week, the operator announced the operation of 2022 Q1. Huawei’s 2021 business performance met expectations. China United Network Communications Limited(600050) issued the announcement on the operation of 2022 Q1. During the operation period, the revenue and profit increased steadily and the high-quality development was steadily promoted. Huawei released its 2021 annual report on March 28. During the reporting period, it achieved revenue of 636.8 billion and net profit of 113.7 billion, a year-on-year increase of 75.9%. Overall, with the continuous breakthrough of 5g applications in China, operators take the lead in improving the marginal performance, which is expected to lead a new round of high growth trend of data traffic and further catalyze the development of digital economy.
Investment suggestion: large space 5g application is the key direction of communication in the future
We believe that the investment focus of the communication industry is shifting from 5g equipment to application, and the valuation first and then the fundamentals are expected to rise. It’s suggested to focus on what’s proposed to focus on: light module: a 3 Zuming Bean Products Co.Ltd(003030) 3030303030 ( Yealink Network Technology Co.Ltd(300628) ), disaster monitoring faucet superimposed with automatic driving target Shanghai Huace Navigation Technology Ltd(300627) ( Shanghai Huace Navigation Technology Ltd(300627) ). At the same time, as a long-term configuration direction, the communication operator sector also needs to pay special attention, and China Mobile (600941) is recommended.
Risk warning: risk of rising raw material price; Global epidemic impact and uncertainty of foreign policy environment; 5g commercial promotion was less than expected.
