Industry core view:
The last trading week was the 19th trading week of A-Shares in 2022. The Shanghai and Shenzhen 300 index rose 2.23%, and 30 of the 31 industries in Shenwan class rose and one fell. The overall trend of the communication industry was stronger than the market last week, rising by 2.5%, ranking 14th and second in the TMT industry. The theme of this year’s world telecommunication and information society day is “digital technology for the elderly and healthy aging”. According to the seventh national census bulletin released by the National Bureau of statistics, as of 0:00 on November 1, 2020, the population over the age of 60 in 31 provinces across the country was 264 million, accounting for 18.70% of the total population, an increase of 5.44 percentage points over 2010. China’s population aging has further deepened. According to questmobile data, with the proportion of silver haired people over the age of 50 reaching 1 / 3, the scale of these Internet users has exceeded 100 million, and the user growth rate is higher than that of all Internet users, becoming an important increment of mobile Internet users. As the entrance of the digital world, intelligent terminal plays an important basic role in the new round of digital economic development. Therefore, building intelligent terminal products suitable for the elderly is not only conducive to intelligent terminal enterprises to share the benefits of the large-scale “silver economy”, but also enable the “silver haired people” to skillfully use the new generation of digital technology, but also benefit a wider range of digital industries, so as to quickly activate a large digital market of 10 billion yuan and help strengthen, optimize and expand the digital economy.
One week industry news: (1) Telecom day: terminals are aging, and big responsibility is a big market; (2) Report card of operators in April: China Telecom Corporation Limited(601728) 5g has the first user growth rate, and the penetration rate is as high as 57%; (3) Deep and wide 5g coverage: 2.1g8t8r towards full scene deployment; (4) China has successfully launched three low orbit communication test satellites; (5) China Unicom launched a new round of centralized purchase of data center switches: 14000 sets with a budget of 1.563 billion; (6) Centralized procurement of 2.7 billion local network optical cables of China Unicom: 12 finalists, and Huaneng (Taian) optoelectronics won the first prize; (7) Ericsson aims at cloud services and enterprise market; (8) Cisco’s performance is under pressure in the short term, and it is still very profitable and strong; (9) “5g communication shell” was officially launched; (10) 5g mobile phone shipments fell 40%
Investment suggestions:
Despite the impact of the epidemic and the price of upstream raw materials, the overall performance of the communication industry maintained a strong growth rate in 2021 and 2022q1, and the overall fundamentals continued to improve. Since March this year, due to the impact of the external geopolitical and macroeconomic environment, the overall correction range of the communication sector has been large. In the medium and long term, the opportunities of the market have exceeded the risks, and the investment value of many high-quality basic subjects has become prominent. Under the uncertainty of macro-economic environment, it is suggested to arrange the leading enterprises in the high view track in the communication sector on the left:
(1) operators: 2022q1 of the three major operators shows a high growth trend. Under the background of “industrial digitization” and “counting East and west”, operators have a good allocation value of stable growth and high dividends. (2) Optical module: the year-on-year growth rate of overseas optical device optical module manufacturers recovered in 2022q1. Although there are still some supply chain problems affected by the epidemic, the recovery of cloud infrastructure construction demand of North American cloud manufacturers since 2021q3 will still drive the prosperity of the whole industrial chain to rebound in the next few quarters. (3) Optical fiber and optical cable: in recent years, with the clearing of excess capacity and the change of bidding mode, the vicious competition of price competition in the industry has eased, and the marginal overall is better. It is expected to usher in the trend of simultaneous increase in volume and price in 2022. (4) Internet of things module: the main driving force of the high growth rate of the industry still lies in the explosive growth of the number of Internet of things connections. The release of relevant performance will continue in 2022, and the new application scenarios brought by 5g module will further release performance. In addition, with the gradual mitigation of the epidemic and the price transmission to downstream customers, the gross profit margin of the sector is expected to stabilize and recover.
Risk factors: increased trade friction, China’s 5g construction does not meet expectations, the slowdown of global cloud computing construction, and the price fluctuation of upstream raw materials.
