Weekly gathering of scientific and technological views (Communication)
There are various application scenarios, and CPE may become a new driving force to drive 5g demand. CPE has various uses and flexible deployment. It is mainly used for signal relay and transforming mobile signals into Wi Fi signals. For individual users, CPE will further support the development of 5g applications such as UHD video and cloud VR; For household users, overseas CPE demand is strong, and China may penetrate from top to bottom; For enterprise users, 5g CPE, as the basic platform of digital application, is expected to become the traffic entrance of enterprise digital transformation. In addition to the network connection function, 5g CPE can also be combined with edge computing as a sinking edge computing node to provide computing power support for relevant equipment.
CPE market has broad prospects, ZTE power and Huawei exit. According to the data of 5g Internet of things alliance, the global market scale of 5g CPE will reach 3 million units in 2020. It is expected that 5g CPE shipments will maintain a compound growth rate of more than 100% in the next five years, reach 120 million units in 2025, and the market scale will be 60 billion yuan. As an important market of 5gcpe, the shipment volume of 5gcpe in China will reach 1.5 million units in 2020 and is expected to reach 80 million units in 2025, with a market scale of 27 billion yuan. ZTE continues to make efforts in CPE, and its market share ranks first in the world in 2021. Due to the tight supply of 5g chips, Huawei’s 5g CPE terminal market will gradually be shared by China ZTE, oppo, Fiberhome, foreign Nokia, CASA, inseego and Taiwan enterprises.
5g CPE industrial chain focuses on IOT module links. At present, China has formed a complete and independent 5gcpe industrial development chain, and the performance of key basic products such as chips, modules and sectors is equivalent to that of similar international products. GSA data shows that as of August 2021, 991 5g terminals have been released worldwide, including 177 5g CPEs, 137 5g modules and 65 gateways / routers, accounting for more than 38%. As the core link of 5g CPE terminal, IOT module is easy to standardize and realize rapid volume; Secondly, there are many investment targets, focusing on a shares; Finally, there is the logic of industry concentration improvement. Chinese module manufacturers use intelligent modules + customized solutions for the Internet of things to help the development of the global 5g CPE industry and constantly seize the share of overseas module manufacturers.
Investment advice
Flexible scenarios such as new broadband infrastructure in Europe and the United States and outdoor / exhibition / live broadcasting in China have made CPE one of the fastest-growing non mobile terminal categories. TSR expects the compound growth rate of global 5g CPE shipments from 2021 to 2026 to be 46%. We suggest paying attention to the global leader of 5g CPE Zte Corporation(000063) and CPE dark horse Meig Smart Technology Co.Ltd(002881) and so on. In addition, CPE has become one of the main scenarios driving the growth of 5g module shipments after PCs, tablets and industrial routers. We suggest paying attention to the leading 5g module Quectel Wireless Solutions Co.Ltd(603236) , Fibocom Wireless Inc(300638) and CAT1 module cutting-edge Shenzhen Neoway Technology Co.Ltd(688159) and so on.
Investment suggestions in May:
In the short term, we believe that the market is worried about the Fed’s interest rate hike, the repeated outbreak in China and the transfer of the supply chain. The market risk appetite may remain low. This round of decline has shifted from the killing valuation stage of the downward risk appetite to the “double killing” revised by EPS. We suggest investors not to be too pessimistic at this time. With the improvement of the epidemic prevention and control situation, the market may usher in the bottom of performance in the semi annual report, At present, we can pay due attention to the targets that are less affected by the supply chain of Shanghai epidemic and have an optimistic outlook for orders in the whole year. In May, we suggested that we should still focus on the absolute income allocation strategy, and focus on the main line of export.
1) China Mobile, China Telecom Corporation Limited(601728) , China United Network Communications Limited(600050) first quarter net profit attributable to the parent company increased by 6.5%, 12.1% and 20.0% respectively year on year. We saw that 5g and Gigabit broadband dividends continued to penetrate, the operator C-end ARPU stabilized and the upward trend remained unchanged, and the ARPU value of Gigabit broadband and fixed network broadband under Zhijia strategy continued to improve. Digital economy has become the main theme of industrial Internet this year, and the b-end aicde business of operators is expected to benefit fully. Among them, the share of mobile and telecom cloud computing continued to increase, and the proportion of b-end performance contribution continued to increase. Operators dominate the construction of computing power network, the attribute of science and innovation is gradually highlighted, and the valuation center is expected to rise. It is suggested to focus on China Mobile and China Telecom Corporation Limited(601728) .
2) the devaluation of RMB is expected to bring marginal benefits to the export-oriented and dollar denominated communication equipment manufacturing industry. The resonance of 5g, broadband and digital communication investment in the North American market has driven the high boom of China Ericsson Nokia supply chain, mainstream digital communication optical modules and broadband equipment sector. Q1 Zhongji Innolight Co.Ltd(300308) , Eoptolink Technology Inc.Ltd(300502) achieved revenue growth of 42% and 18% respectively year-on-year. The order guidance of overseas cloud customer manufacturers remained strong. At the same time, the shipment volume in the second half of the year was higher than that in the first half of the year. We suggest to continue to pay attention to the attractive Zhongji Innolight Co.Ltd(300308) , Eoptolink Technology Inc.Ltd(300502) , Broadex Technologies Co.Ltd(300548) , Henan Shijia Photons Technology Co.Ltd(688313) . In addition, Yealink Network Technology Co.Ltd(300628) q1’s revenue increased by 40.1% year-on-year, and the gross profit margin increased by 1.4pct month on month. The unified communication market of overseas enterprises continued to maintain a restorative growth after the epidemic. At the same time, the company launched the overall solution of small conference room and cloud desktop terminal, which is expected to drive the growth of the second growth curve. The company has launched a business partner incentive mechanism, with a compound growth rate of more than 30% in revenue target. It is expected to cultivate a stronger sales team and dealer partners. It is recommended to continue to pay attention.
Risk tips
5g CPE volume was lower than expected.
