This week, the CSI 300 rose by 2.43%, and the gem rose by 1.10%, of which the communication sector fell by 2.39%, and the price performance of the sector was weaker than the market; The turnover rate of 126 constituent stocks of the communication (CITIC) index this week was 1.54%; In the same period, the turnover rate of 300 constituent stocks in Shanghai and Shenzhen was 0.48%, and the overall activity of the sector was stronger than that of the market. In terms of individual stocks in the communications sector, the top five gainers this week are: Hangzhou Freely Communication Co.Ltd(603602) (18.72%), Hengbao Co.Ltd(002104) (14.84%), Beijing Tongtech Co.Ltd(300379) Xinxin (10.69%), Gome communications (10.20%), Hengxin Shambala Culture Co.Ltd(300081) (8.98%); The top five companies with declines were Super Telecom Co.Ltd(603322) (- 14.95%), Wingtech Technology Co.Ltd(600745) (- 13.76%), mengwang group (- 11.52%), Shenzhen Roadrover Technology Co.Ltd(002813) (- 11.21%), Shenzhen Kexin Communication Technologies Co.Ltd(300565) (- 10.67%).
The overall operation was in line with expectations and cash flow increased significantly. Huawei recently released its 2021 annual report. The annual operating revenue was 636807 billion yuan, a year-on-year decrease of 28.56%, the net profit attributable to the parent company was 113718 billion yuan, a year-on-year increase of 75.90%, the net interest rate was 17.86%, a significant year-on-year increase of 10.6pct, and the operating cash flow was 59.67 billion yuan, a year-on-year increase of 69.43%. The overall statement is in line with expectations. The company’s revenue was mainly dragged down by the sharp decline in consumer business. In terms of business, the revenue of the company’s operator business, enterprise business and consumer business in 2021 was 281469 billion yuan / 102444 billion yuan / 243431 billion yuan respectively, with a year-on-year change of – 6.99% / 16.09% / – 49.59%. In 2021, the gross profit of the company was 307442 billion yuan, with a gross profit margin of 48.3%, an increase of 11.6pct year-on-year. The improvement of profitability was mainly due to the following three points: first, the adjustment of product sales structure and the increase of the proportion of high gross profit business led to the increase of overall sales gross profit margin; second, the collaborative management of supply plan and digital operation promoted the improvement of internal operation efficiency. The annual cost was 246827 billion yuan, of which the sales and management expenses decreased by nearly 10 billion yuan, Third, during the reporting period, the net income from the disposal of assets obtained from the sale of glory and hyperfusion was 57.431 billion yuan, and the net profit after deduction was 56.287 billion yuan, a year-on-year decrease of 12.94%, the net interest rate was 8.84%, and a year-on-year increase of 1.59pct. The company’s operating cash flow in 21 years was 59.67 billion yuan, with a year-on-year increase of 69.4%, and the asset liability ratio was 57.8%, with a year-on-year decrease of 4.5pct. The adequacy of cash flow and the improvement of capital structure provided guarantee for the company’s sustainable operation, R & D and innovation.
Government and enterprise businesses have developed steadily, and Huawei cloud and intelligent auto parts have become new growth points. Government enterprise business has become the only positive growth business segment of Huawei in the whole year. In recent years, the proportion of revenue has been increasing, which was 16.09% in 2021. The company has released 11 landscape solutions for key industries such as government, transportation, finance, energy and manufacturing, and established legions of coal mines, smart roads, customs and ports, covering more than 700 cities and 267 world top 500. Huawei cloud has a revenue of 20.1 billion yuan in 21 years, with a year-on-year increase of 34%. It ranks second in China and fifth in the world in the IAAs market. It is expected to become a new growth point of future performance. Affected by the slowdown in the pace of global 5g construction, the growth rate of operator business decreased slightly, accounting for 44.20% of revenue, with a year-on-year increase of 10.25pct, of which overseas revenue accounts for more than 50%. Huawei has contracted 5g networks for 13 countries such as Switzerland, Germany and Finland, and promoted the application of more than 3000 5g industries. Due to the impact of overseas trade disputes on mobile phone, tablet and PC businesses, the revenue scale of consumer business shrank by nearly half, accounting for a year-on-year decrease of 15.95pct to 38.23%. The company expanded innovative categories to improve the revenue of the sector. The revenue growth rate of wearable devices, smart screens and other products exceeded 30%. At the same time, it accelerated the construction of Hongmeng ecology. By the end of 21, there were more than 220 million Huawei devices equipped with harmonyos and more than 730 million monthly live users of Huawei terminals worldwide. The smart auto parts business has built seven smart auto solutions, listed more than 30 smart auto parts, and reached cooperation with many mainstream auto enterprises at home and abroad. The new hi version of Beiqi Jihu alpha s, Chang’an avita 11 and AITO question M5 (smart option) will be mass produced and delivered in 2022.
R & D investment reached a new high, adjusted business structure and enhanced independent core competitiveness. The company continued to increase R & D efforts. In 2021, the R & D expenditure was 142.7 billion yuan, accounting for 22.4% of revenue, with a year-on-year increase of 6.5 PCT. The amount and rate of R & D expenditure were the highest in recent ten years. At present, Huawei’s R & D investment ranks second among global enterprises. By 2021, the company has engaged in research and development of about 107000 people, accounting for 54.8% of the total number of the company. The company holds more than 45000 families of valid patents (more than 110000 pieces), and more than 90% of them are invention patents. It is in a leading position in many mainstream standard fields such as 5g, wi-fi6 and h.266. The company has actively invested in research and development in the three reconstruction directions of basic theory, architecture and software. In recent years, the company has invested more than 20 billion yuan in basic research every year to strengthen non molar process. The third generation semiconductor of wireless base station uses gallium nitride material to replace LDMOS, reducing energy consumption by 20%. In optical communication, silicon-based liquid crystal LCOS exchange, digital optical layer and hologram algorithm are used to promote the evolution of OXC. From the perspective of the latest business architecture, Hisilicon has upgraded from a secondary department to a primary department side by side with Huawei cloud computing and intelligent vehicle solution bu. It is positioned to provide end-to-end board level chip and module solutions for intelligent terminal, display panel, home appliances, automotive electronics and other industries, such as perception, connection, calculation and display. Huawei continues to increase the research and development of chips, and the main communication products adopt multi-core structure to support software architecture reconstruction and performance multiplication, so as to enhance the continuous supply capacity of chips.
Terminal innovation and new energy drive, focusing on the first quarter performance of Internet of things and submarine cable related targets. 5g has turned to the application demand driven stage, and the prosperity of the Internet of things industry has been improved in the field of terminal innovation such as vehicle and FWA. According to the counter point data, the global cellular Internet of things module revenue increased by 57% year-on-year in 21 years, of which 5g module revenue accounted for nearly 1 / 4 in the fourth quarter, and 5g and 4gcat1 became the fastest growing technologies, with a year-on-year increase of 324% and 105% Quectel Wireless Solutions Co.Ltd(603236) and Meig Smart Technology Co.Ltd(002881) ranked first and third in global manufacturers’ revenue in 21q4, with shares of 26.6% and 6.6% respectively. The net profits of Chinese module manufacturers for the year-on-year year year-on-year net profits for the year-on-year growth of the year-on-year net profits of Chinese module manufacturers for the year-on-year growth rate respectively 85.95%, 41.51%, and 328.21% respectively for the year-on-year growth of the year-on-year growth respectively for the year-on-year net profits for the year-on-year growth respectively for the year-on-year net profits of the year-on-year growth rate respectively for the year-on-year growth of 85.95%, 41.51.51%, 41.51% and 328.21.21% respectively respectively respectively respectively for the year-on-year net profits of the year-on-year net profits of Chinese module manufacturers for the year-on-on-year growth respectively, respectively. The year net profits for the same year net profits for the year net profits of the year net profits for the year net profits of the same year growth growth growth for the year for the year for the year for the year for the year for substantial growth in performance. According to the announcement, from January to February of Quectel Wireless Solutions Co.Ltd(603236) 22, the revenue and net profit attributable to the parent company were about 1.9 billion yuan (yoy68%) and 66.6 million yuan (yoy50%), both exceeding the data of 21q1. It is expected that the industry will continue to be booming driven by demand in 22 years, and the share of domestic manufacturers is expected to further increase.
Automobile connector, harness and controller manufacturers have benefited from the trend of automobile electrification, intelligence and networking and the opportunity of industrial eastward movement. The overall performance has increased significantly in 21 years. It is expected that with the stabilization of upstream raw material prices and the easing of supply tension, the orders will be full and the profitability will be improved in 22 years. According to Kunshan Huguang Auto Harness Co.Ltd(605333) announcement, the company achieved a revenue of about 410 million yuan from January to February of 22 years, with a year-on-year increase of about 65%. Driven by the dual carbon policy, all localities have issued the 14th five year plan for sea breeze, and the demand for submarine cables has increased. Recently, Shandong has explicitly supplemented the policy after Guangdong to accelerate the development of the local sea breeze industry. According to the announcement of Jiangsu Zhongtian Technology Co.Ltd(600522) and Ningbo Orient Wires & Cables Co.Ltd(603606) in January February 2022, the company’s revenue and net profit attributable to the parent company were about 6 billion yuan and 800 million yuan respectively, with a year-on-year increase of about 17% and 300%. The recent announcement of winning the bid of Hengtong Optic-Electric Co.Ltd(600487) and Ningbo Orient Wires & Cables Co.Ltd(603606) enhanced the certainty of 22-year performance.
Investment suggestions: Internet of things and car Networking: Quectel Wireless Solutions Co.Ltd(603236) \ etc; On board connector: Suzhou Recodeal Interconnect System Co.Ltd(688800) , Wenzhou Yihua Connector Co.Ltd(002897) ; Intelligent controller: Shenzhen Topband Co.Ltd(002139) , Shenzhen H&T Intelligent Control Co.Ltd(002402) , Shenzhen Longood Intelligent Electric Co.Ltd(300543) , Shenzhen Bestek Technology Co.Ltd(300822) ; Focus on equipment manufacturers: Unisplendour Corporation Limited(000938) (Xinhua III), Zte Corporation(000063) , Fujian Star-Net Communication Co.Ltd(002396) ; Telecom operators: China Mobile, China Telecom Corporation Limited(601728) , China United Network Communications Limited(600050) ; Data center: Shanghai Baosight Software Co.Ltd(600845) , Kehua Data Co.Ltd(002335) , Beijing Sinnet Technology Co.Ltd(300383) , etc; Optical devices and optical modules: Eoptolink Technology Inc.Ltd(300502) , Suzhou Tfc Optical Communication Co.Ltd(300394) , Accelink Technologies Co.Ltd(002281) ; Military communications and satellite applications: Jushri Technologies Inc(300762) , Tianjin 712 Communication & Broadcasting Co.Ltd(603712) , Shanghai Huace Navigation Technology Ltd(300627) , Chengdu Corpro Technology Co.Ltd(300101) , Guangzhou Haige Communications Group Incorporated Company(002465) , China Satellite Communications Co.Ltd(601698) , etc; IDC HVAC equipment: Shenzhen Envicool Technology Co.Ltd(002837) , Nanjing Canatal Data-Centre Environmental Tech Co.Ltd(603912) , Yimikang Tech.Group.Co.Ltd(300249) , etc.
Risk warning events: 5g investment is less than expected, market competition intensifies, overseas trade disputes, market systemic risks, etc
