20180202-川财证券-_Chuancai_Research_2018_Strategy_Report__2018_China_Equity_Market_Telecommunication_Outlook_19页_2mb

2018 Telecom Sector Investment Summary

Core Content

The 2018 equity research report highlights the opportunities in the telecommunications sector, particularly in the areas of telecom operations, optical communication, 5G, and IoT. Despite the communication sector's overall decline in 2017, the telecom transmission equipment segment showed strong growth, outperforming the broader market. The report outlines key investment rationales for 2018, focusing on structural changes and technological advancements in the industry.

Main Business Shift in Telecom Operators

• Shift in Focus: Mobile telecom operators have transitioned from voice services to mobile data services.
• User Base Impact: Operators with smaller user bases, like China Unicom, have a lower chance of data service blockage and higher average network speed.
• Competitive Edge: China Unicom is expected to improve user experience through network expansion and innovation in IoT and big data.
• Policy Support: Favorable policies, such as roaming and number portability, are expected to benefit China Unicom.
• Investment Recommendation: China Unicom (600050.SH) is recommended with a "BUY" rating due to its potential to narrow the gap with China Mobile.

Optical Communication Opportunities

• Drivers: Fixed-line broadband, 5G, and IDC are key drivers for the growth of optical communications.
• Bandwidth Demand: The increasing demand for bandwidth, especially with VR, has pushed the need for higher capacity optical networks.
• Industrial Chain: The optical communication industry chain is mature in China, including optical network equipment and optical cable manufacturing.
• Investment Suggestion: Investors should focus on companies like TFC (300394.SZ), ZHONGJI INNOLIGHT (300308.SZ), and FIBERHOME (600498.SH) due to their involvement in optical devices and infrastructure.

Internet of Things (IoT) Development

• Market Potential: The global IoT market is projected to reach 28.1 billion connections by 2020, generating significant revenue.
• NB-IoT Technology: NB-IoT is a key technology for IoT applications, especially in smart meters.
• Commercialization: NB-IoT commercialization has started in China, with successful M&A and pre-commercial tests.
• Investment Recommendation: GOLDCARD (300349.SZ) is highlighted as a leading company in the NB-IoT gas meter area. Other companies like EASTONE CENTURY (300310.SZ) and SANCHUAN WISDOM (300066.SZ) are also recommended.

5G Technology Outlook

• Performance: 5G offers a peak rate of 10G-20Gbps and reduces transmission delay to the millisecond level.
• Impact: 5G is expected to drive IoT and Industry 4.0, becoming a major catalyst for digital transformation.
• Commercialization Timeline: Large-scale 5G construction is likely to begin around 2022 in China.
• Investment Focus: Investors should pay attention to wireless and transmission equipment, which will benefit from the development of fixed networks and IDC.
• Recommended Companies: ZTE (000063.SZ), FIBERHOME (600498.SH), ZHONGJI INNOLIGHT (300308.SZ), and others involved in the 5G industrial chain.

Key Risks

• Technical Issues: Potential technical challenges following large-scale NB-IoT commercialization.
• 5G Delays: Delays in the 5G commercialization timeline could affect investment returns.

Investment Suggestion Summary

• China Unicom (600050.SH): Recommended with a "BUY" rating.
• Optical Communication Equipment: Focus on TFC, ZHONGJI INNOLIGHT, FIBERHOME.
• IoT Applications: Pay attention to GOLDCARD, EASTONE CENTURY, SANCHUAN WISDOM.
• 5G Infrastructure: Monitor ZTE, FIBERHOME, ZHONGJI INNOLIGHT, and other companies in the wireless and transmission segments.

Analysts and Contact Information

• Analysts: Li CHEN, Peng WANG, Chao HUANG
• Contact: Wenyi ZHOU

Research Division Locations

• Beijing: Floor 15, China Overseas International Center, 28 Pinganli West Street, Xicheng District
• Shanghai: Floor 11, Hang Seng Building, 1000 Lujiazui Ring Road
• Shenzhen: Floor 21, Duty-free Building, 6 Fuhua 1st Road, Futian District
• Chengdu: Floor 17, Unit B, China Overseas International Center, Sichuan Pilot-Free Trade Zone

Rating Explanation

• Stock Ratings: "BUY" for ≥30% return, "Increase" for 15%-30%, "Neutral" for -15% to +15%, "SELL" for ≤-15%.
• Sector Ratings: "OVERWEIGHT" for ≥30% outperformance, "Increase" for 15%-30%, "Neutral" for -15% to +15%, "UNDERWEIGHT" for ≤-15%.

Disclaimer

This document is issued solely for the information of Chuancai Securities Limited's clients and remains confidential unless authorized or publicly disclosed.