Review of the communication industry this week (April 18, 2022-april 22, 2022):
The communication industry fell this week: this week, the Shanghai composite index was – 3.87%, the Shenzhen composite index was – 5.12%, the gem index was – 6.66%, and the communication industry index was – 2.28%. Among the 106 stocks in the communication industry sector, the number of rising and callback was 13 and 92 respectively, with a median rise and fall of – 4.89%.
This week, the communication sub section showed a stabilizing trend compared with last week. Among them, the main equipment manufacturers increased by 0.62% (mom + 2.63pct) and operators increased by 0.06% (mom + 2.68pct) this week. In terms of industry, with the gradual development of centralized procurement by operators, we believe that on the basis of 700m wide distribution network, the target of Shanghai Pudong Development Bank Co.Ltd(600000) new 5g base stations in 2022, and the large-scale expectation of small base stations, the main equipment manufacturers have a long-term stable growth trend. In other sectors, the decline of video conferencing, Internet of things and other sectors gradually stabilized.
The quality of 1q22 revenue of operators has increased comprehensively, and cloud related value-added services are expected to continue to be enabled:
This week, Chinese operators released 1q22 quarterly reports, and the three operators achieved year-on-year growth in revenue and net profit. The total number of 5g users is 849 million, and the growth rate of new 5g users is better month by month. In terms of splitting, China Mobile’s ICT business 1q21 achieved revenue of 23.7 billion (YoY + 50.9%), China’s telecom industry’s digital business achieved revenue of 29.414 billion (YoY + 23.2%), and China United Network Communications Limited(600050) also had double-digit growth. Under the condition of stable growth of traditional business of operators, digital business has become an emerging growth point. We believe that as the capital expenditure of operators gradually inclines to the cloud in 2022, operators are expected to develop the second growth curve of cloud related value-added services by virtue of scale advantages, and boost the overall profitability. Combined with the brilliant performance of 1q22 operators, this logic is being gradually verified.
Investment suggestions:
(1) the improvement of data transmission rate will be the main line before the large-scale popularization of 5g application. In 2022, the digital communication side optical module will be upgraded from 100g to 200g and 400g, with strong demand. The market share of Chinese enterprises exceeds 60%. Companies with strong technology and channel capabilities are expected to benefit preferentially under the trend of cycle arrival + clear demand orientation. Suggested attention: Zhongji Innolight Co.Ltd(300308) ( Zhongji Innolight Co.Ltd(300308) . SZ).
(2) the Internet of things / Internet of things will be one of the main themes of 5g era. The revenue scale of Chinese enterprises’ Internet of things / Internet of vehicles module ranks first in the world. It is expected that with the gradual emergence of China’s anti epidemic effect, the performance of relevant enterprises is expected to improve marginally with the gradual promotion of resumption of production and work. Under the condition of upgrading + high demand, companies with global multi industry and Multi Country qualifications and all product and all channel layout are expected to benefit first. It is suggested to pay attention to: Quectel Wireless Solutions Co.Ltd(603236) ( Quectel Wireless Solutions Co.Ltd(603236) . SH), Meig Smart Technology Co.Ltd(002881) ( Meig Smart Technology Co.Ltd(002881) . SZ), Beijing Inhand Networks Technology Co.Ltd(688080) ( Beijing Inhand Networks Technology Co.Ltd(688080) . SH).
Risk warning: the risk of uncertainty in international relations, the risk that the shipment volume is lower than expected due to the epidemic, and the progress of 5g construction is lower than expected
