Communication equipment, 76 companies, with a total market value of 750 billion, PE57.
This index has been relatively weak in recent years, with a peak of 6500 in 2015 and a drop below 2000 at the end of 2018. Three times in these years, the peak has stopped at 3800. In February of this year, it has fallen back to 2300, only slightly higher than 2000 at the end of 2018, indicating the flat nature of the index. Only by looking back on a longer history can we identify its glorious era. In 2012, the A-share market as a whole was still struggling in a bear market. However, communication equipment was strengthened due to the upward trend of the industry cycle, and continued to rise in 2013. Later, it soared through a leveraged bull market. From 2012 to 2015, the index soared from 600 to 6000, which was its most glorious era.
“Looking back at these years and their highlights, we want to illustrate that an era of excessive highlights may overdraw the next few years. Even if the industry’s cycle has ushered in another round of rise in recent years, it is difficult for the stock market to set off waves.”.
At the same time, let’s take a look at the fundamentals. What is the global position of China’s communication infrastructure like today? Is it a priority? Of course it is. We have not only completed the global anti hypermarket in this industry in the 4G era, but also led the world in the 5G era. This is not the future, it is already. In this regard, Huawei’s leadership in science and technology is indispensable. China’s national strategy attaches great importance to communication and invests heavily. China Mobile, China Unicom, and China Telecom are also indispensable. In the process of China’s communications from being backward, catching up, and driving to catching up, tremendous development opportunities have been achieved in the industry. All of these have already occurred, and their golden growth era has basically ended.
Some people may think that communication technology is changing with each passing day, and 5G has just arrived in the middle of the field, and many foreign countries have even started it. The future 6G is not far away. With the development of the Internet of Things, artificial intelligence, cloud, and other technologies, is there still huge room for the development of communication infrastructure! However, I personally do not support this expectation very much, and it is difficult for me to provide you with an accurate statement using technical analysis. However, in comprehensive judgment and prediction, these technologies or some communication technologies that we have not seen will of course be upgraded from generation to generation, but the communication infrastructure that has basically met the needs of modern society has been completed, and in the future, it may be more iterative development in the software direction, There may be more hardware upgrades in base stations, but it is difficult to meet the demand that can support the rapid growth of the entire communication equipment industry for many years. In addition, the communication equipment industry is an intermediate equipment manufacturing industry. For telecommunications operators, namely “Party A”, the communication equipment company is the “Party B” with a weak voice. Therefore, the gross and net profits of the industry, even in the past years, when demand was very strong, were at a reasonable or reasonably low level.
Today, these companies are among the “communication network equipment and accessories” in communication equipment, with a total market value of 340 billion yuan. The PE45 is not too high, nor can it be underestimated. In terms of revenue and profit within the sector, ZTE is the only company with low comparability with other companies. Among the comparable companies, the profitability ranks Zhongji Xuchuang, New Eason, Guangxun Technology, and Starnet Ruijie. Among them, three are the stocks involved today, namely, these mainstream communication network equipment companies that have already ranked in the forefront today.
This segment belongs to a relatively strong segment in communication equipment. It was one of the sectors that recovered quickly after the stock disaster in 2015, hitting a new high at the end of 2016, which should be the support of the industry’s prosperity. At the end of 2017, it reached a new high, and in 2018, it plummeted with the overall market collapse. The index fell from 6300 to 3200, halving, which is of course a significant historical bottom. In the spring of 19, the market doubled to 6300, but after that, it went up and down sharply. In February and July 2020, it formed two large peaks of 7800, and then fell mainly. In April of this year, the bottom was once again detected. At first, there was a band rise in the market to 6200, and then there was a decline. At present, 5500, which was reached during the rise at the end of 2016. Therefore, from a long-term perspective, over the years 2016-2021, the segment index at the same height echoed from afar, There are all five flavors.
During the above historical period, China’s 4G industry reached its peak, and then rapidly upgraded into the 5G era. Now, 5G should have entered the middle ground. The past few years have also been considered a golden era in the communication equipment industry. Overall, the index has shifted its focus upward, and has been quite popular at various stages. It has also emerged from a few bull stocks. However, in general, the market strength of this segment is limited, and some of it belongs to the “traditional manufacturing industry”.
This year, we spent so much time discussing communication equipment and further subdivided communication network equipment and accessories, because companies investing in this industry mainly invest in the industry. Below, we will briefly describe companies.
Committed to reshaping the efficient management of electricity, water, gas, and thermal energy with Internet of Things technology and providing digital and intelligent solutions for fire protection, parks, communities, and cities.
“We can only assume that the financial data of the second IPO is basically reliable (not specific to it, but it is inevitable that the financial data of the first two or three years before the IPO will be cosmetology and cosmetic surgery). In addition, after all, it has been listed for two years, and it is basically possible to use its financial data for reference. In the past three years, the revenue has been slightly in double digits, and the deduction is still a few points higher. I hope it is true. The gross profit margin is above 30%, and the net profit is 15-20%. A typical equipment supplier’s profit structure cannot be high,”, It will not be too low, such as a few points, but a respectable gross profit of around 30 points. However, when there are homogeneous suppliers and they bargain with each other, such cultural politeness arrangements are not observed.
By the way, Weisheng Information mainly refers to the Internet of Things, which is a new field, not our usual communication. It should belong to another category with the following companies in terms of category.
Institutions have developed a certain interest in it, and the fund has a few percent allocation.
The secondary market is also too “low key”, so low key that the number of people who pay attention to it is really too small. It is almost like listing for a photo, then taking off the dress, taking a few steps, and then walking into the vast crowd, until now.
Overall, it is still too mundane to give a rating above Samsung.
Provide information based solutions for enterprise level customers.
The latest situation regarding the listing of the spinoff subsidiary Ruijie Network Technology Innovation Board is the suspension of the review. Is this split listing positive or negative? Increasing financing to develop companies, but having to dilute equity, will reduce the proportion of future profits. Moreover, if the company’s future development potential lies in splitting up subsidiaries and the parent company’s other business development is flat, the valuation of such parent companies tends to be low, which is easy to understand. If it is optimistic that its subsidiaries are the main contributors, it is better to invest directly in subsidiaries. In company research reports, the focus is often placed on subsidiaries, citing a paragraph: According to IDC data, in 2020, the subsidiary Ruijie Network Ethernet Switch ranked third in the domestic market share, and the enterprise terminal VDI ranked first in the domestic market share; Shengteng’s thin client market accounted for 31.8%, ranking first in the Asia Pacific market for nine consecutive years, and firmly ranking first in China with a market share of 39.9%.
According to the company’s operating data, the revenue has kept pace in the past three years, with a relatively rapid growth this year, with a peak in 19 years and a decline in 20 years. This may be due to the epidemic, but this year it has basically recovered and increased somewhat.
Institutional positions are only 5%, and they have accounted for a very low proportion for five consecutive seasons. Previously, the proportion was as high as 13%, and there was no intention of institutions coming back and walking around once they went.
In terms of stock prices, from March 19th to March 20th, after rising from 15 to 50, they fell back one year to 18 yuan, not to mention a small decline. They almost returned to the starting point and rebounded to 32, which was the end of the previous low. In the past three years, they slowly fell to 22 yuan, which was quite disappointing.
It seems that there are still some bright spots in the proposed spin-off of its subsidiary. Operating data has maintained double-digit growth, valuation has been reduced to 20, and safety is acceptable. It is difficult to predict when the wind will rise again in the future.
Based on comprehensive consideration, it will be rated above Samsung.
Optical communication devices.
Let’s start with an interesting discussion from the super rearview mirror. If anyone can predict the top and bottom of the band, just this stock, combined with the top and bottom profits of the band in recent years, may have the potential to become the richest person.
From the perspective of gross profit and net profit in the single digits, the product may belong to a product with low technical content. However, the research report mentions that its undervalued chips are precisely proof that chips are also classified into three to six to nine categories, rather than talking about high-end chips.
Business performance: In the past three years, revenue has increased by an average of 10% annually, with non profit deduction mainly due to a good increase in the past 20 years. However, this year, it is mainly due to the exceptional performance in the first quarter that has hit a good bottom, and the second and third quarters have not been very pleasant. Year-on-year revenue and profit have both decreased somewhat. Expectations or expectations for performance can only be expected from the fourth quarter.
The fund reported a median of 12% last year and 5% today, with a significant increase in the number of shareholders and a tendency towards retail investors.
The market value of public funds in the communication industry ranks ninth.
The stock price of this company in the secondary market, as mentioned earlier, is very rare to see a company with such a trend. Long term positions require a strong heart. Fortunately, the current valuation is only over twenty times higher, and there should be no significant risk.
Based on comprehensive consideration, it is rated above Samsung.
The business situation grew slowly for a long time, until 2019, when it suddenly accelerated and jumped, mainly due to the rapid growth of high-speed optical module business. The eyes of the market are bright, and the stock price continues to rise from 2019 to 2020. A 6-yuan stock has risen to 60 yuan, ten times the stock price. You really have to convince Mr. Market of his timely response to the company’s performance. According to the theory of ten times the stock price, we will veto it with one vote. However, one is that the peak was last July, and the other is that the valuation has decreased to below 30 times through more than a year of decline. Although the institutions have decreased from 27% of the peak, there are still 16%, That’s why we shouldn’t give up easily.
The growth of foreign businesses has been impressive, with a current proportion of up to 80%. For companies whose main business is overseas, this is a double-edged sword. For companies whose main revenue is overseas, A-shares often feel uneasy. Yes, they are worried about the true or false moisture content, so their valuation points are reduced. As an analysis of the communication equipment industry, the current climax of the development of the domestic market may have passed. Companies that can share a piece of cake in the foreign market are aspiring, and hope that this ambition can be translated into sustained revenue gains.
Currently, the company has taken the lead in the research and development of high-speed optical modules and silicon optics, with a leading technical position. Driven by self research and acquisition, the company is expected to continue to enhance its advantageous position in the high-end market. In the future, driven by the dual drive of overseas data communication and domestic telecom business optical module expansion, the company is expected to fully and continuously obtain head dividends.
Growth is very important for investment. It is the jump in performance that has led to the achievement of 2019-2020. This is also the company’s current bonus item, and we should pay close attention to it. However, the growth of the company continues. Once it declines to a year-on-year or month-on-month growth rate, the problem becomes serious. In the first and second quarters of this year, compared to the previous year, there has been a significant decline in growth rate. The third quarter reported a negative revenue and deduction, which can be called a thunderbolt, but the stock price only plummeted for one day, This can only be seen from the fact that it has been adjusting for more than a year, mainly falling in the last three months, and is now at the bottom of several years of decline. That is, the cumulative decline is relatively large, and the valuation is more than 20 times, which is understandable.
Growth is the most fundamental principle. At present, we have given appropriate patience to the company’s temporary growth difficulties, and due to the grounding of valuation, the risk level has been reduced, which can be sustained with attention.
The market value of public funds in the communication industry ranks sixth.
At the stage of rating, to be honest, the three companies today have similar overall quality, and there are no special highlights, but they also make up. Unexpectedly, I didn’t choose one of them. After comprehensive consideration, either I didn’t qualify for Samsung, or I chose to give them a rating above Samsung.
Communication equipment technology enterprise