The digital economy has become the core engine of China’s economy. The resumption of China and the United States in the past 15 years has inspired the changes in the value-added structure of the core industries of the digital economy.
During the “14th five year plan” period, the digital economy will continue to develop in an all-round way in the three major fields of investment, consumption and trade, especially focusing on the transformation from hardware in digital investment to ICT services, further tapping the potential of digital consumption in consumption and expanding the scale of digital delivery in trade. According to the plan, the growth rate of China’s core industries of digital economy during the 14th Five Year Plan period will be higher than 10%, which will be the main policy logic of the future science and technology growth track. Compared with the value-added structure of the core industries of the U.S. digital economy, we believe that China’s industrial manufacturing sector will expand to a high-end and deep level in the future, and the growth space of the service application sector is still huge, especially the cloud computing services and intelligent solutions combined with vertical industries.
Digital infrastructure: optimization and upgrading, integration of computing networks and industry implementation.
During the “14th five year plan” period, the investment in 5g base stations, broadband access and backbone transmission networks will remain relatively stable without obvious periodic fluctuations. The valuation of the communication industry will “ignite” or need to pay attention to the popularity of C-end applications such as metauniverse and the intelligent transformation of various vertical segments. In terms of operator investment, we believe that there are structural opportunities in Gigabit broadband, computing network integration and low-carbon green. Space infrastructure, including satellite communication, satellite remote sensing, satellite navigation and positioning, is of great strategic significance and commercial value. The planning focuses on the intelligent upgrading of industry infrastructure. We believe that edge computing is an important infrastructure to support industry intelligence, and the development of underlying technologies such as machine vision, multi-dimensional sensing, GPU acceleration and AI acceleration will be accelerated.
Data resources are the key elements, industrial digitization is imperative, and the digitization of public services will continue to improve.
Data has become the core strategic resource in the information age. During the “14th five year plan” period, we will accelerate the digital transformation of enterprises, support large enterprises to build a unified digital platform, and intelligentize the key business links of small and medium-sized enterprises. Specifically, we suggest paying attention to intelligent manufacturing, industrial Internet, financial technology and energy informatization. During the 14th Five-Year, public service digitalization will continue to benefit the people’s livelihood. Internet plus government affairs will grow steadily. Education informatization, medical information, digital media display, smart community and intelligent pension will be more sinks. In addition, the task of public service digitization in the growth period, “three supplies and one industry” may become the focus of smart city transformation. It is suggested to pay attention to the digitization of water supply and heating.
Digital industrialization should be stronger and more stable.
From the supply side, during the 14th Five Year Plan period, China will give full play to its institutional and institutional advantages to improve the basic R & D capacity of digital technology. Government guided investment and industrial cluster development will rapidly cultivate a number of “specialized and new” enterprises. At the demand level, the plan proposes to give play to China’s “super large-scale market advantage” and form a virtuous cycle of R & D, mass production and innovation. We are optimistic about the broad market space of domestic substitution logic. From the current market share of high-end chips, operating systems, industrial software, core algorithms and frameworks, there is no obvious ceiling for domestic substitution in the “14th five year plan”. It is planned to further mention the industrial chain, supplement the chain and strengthen the chain, and the upstream chips, equipment and basic software may receive additional attention. During the “14th five year plan” period, the leading enterprises will continue to benchmark overseas development, pipeline will be gradually improved, and it is expected to continue to deliver performance in terms of volume and price.
Investment advice
Since the beginning of 2022, the market risk appetite has decreased significantly, the institutional positions have migrated to the undervalued sector, and the main track is facing a significant retreat. We believe that it is mainly related to the rise of risk aversion and wait-and-see sentiment under the change of macro environment, and the market has not formed a consistent expectation line yet. The “14th five year” digital economy development plan points out the direction of efforts from the transformation of economic structure and is expected to become a forward-looking guide from the medium-term perspective of science and technology growth and investment. In the medium term, China’s digital economy has entered a new stage of high-end, service-oriented and making up for weaknesses. In the process of business transformation, relevant “old” companies will see their performance gradually realized. In the short term, the emerging areas focused by the planning will support the breakthrough of “new companies” from 0 to 1, and there will also be phased theme investment opportunities, especially the “specialized and special new” related companies, which may enjoy a certain premium of valuation. From a medium-term perspective, we suggest focusing on three main lines.
1) in terms of infrastructure, attention should be paid to structural upgrading and weaknesses, such as F5G, data center supply and demand rebalancing, cloud network integration, communication + space infrastructure, communication + new energy, etc. it is recommended to pay attention to Zte Corporation(000063) , Unisplendour Corporation Limited(000938) , Broadex Technologies Co.Ltd(300548) , Accelink Technologies Co.Ltd(002281) , Zhongji Innolight Co.Ltd(300308) , Hangzhou Anysoft Information Technology Co.Ltd(300571) , Sichuan Tianyi Comheart Telecom Co.Ltd(300504) , Skyworth Digital Co.Ltd(000810) , Shanghai Baosight Software Co.Ltd(600845) , Piesat Information Technology Co.Ltd(688066) , China Spacesat Co.Ltd(600118) .
2) industrial digitization pays attention to the opportunity of “old trees and new flowers”. Re examining the development of old computer companies, we believe that they have a more profound accumulation of technology and a stable fundamentals forged by years of deep cultivation. At the same time, they are also expected to usher in the upsurge of spin off and listing of subsidiaries. It is recommended to pay attention to Yonyou Network Technology Co.Ltd(600588) , Grg Banking Equipment Co.Ltd(002152) , Longshine Technology Group Co.Ltd(300682) , Yusys Technologies Co.Ltd(300674) and Opt Machine Vision Tech Co.Ltd(688686) , Zwsoft Co.Ltd(Guangzhou)(688083) , Zhejiang Heda Technology Co.Ltd(688296) , Runa Smart Equipment Co.Ltd(301129) of new opportunities in traditional industries.
3) digital industrialization pays attention to new tracks and opportunities. During the “14th five year plan” period, domestic substitution is the most deterministic logic, and new opportunities for relevant new tracks continue to emerge. We suggest paying attention to leading companies in high-end logic chips, core link semiconductor equipment, core semiconductor materials, high-end industrial equipment and biotechnology, such as Naura Technology Group Co.Ltd(002371) , Advanced Micro-Fabrication Equipment Inc.China(688012) , Quantumctek Co.Ltd(688027) , Longxin Zhongke (application), Shengke communication (application) Shanghai Anlogic Infotech Co.Ltd(688107) , Maxscend Microelectronics Company Limited(300782) , Aojie Technology (registered to be issued), etc.
Risk tips
The global epidemic has repeatedly caused uncertainty for economic growth, the intensification of Sino US science and technology trade friction has affected the stability of the supply chain, the slow landing of 5g applications has led to lower capital expenditure of operators than expected, and the cultivation of new business forms of platform economy is lower than expected.
