In the post-4G era, indoor coverage of Small Cell will usher in an explosion
1. Outlook for the fourth quarter: Combined with the current circulating market value and dynamic valuation level, the two key driving forces for the 2014 telecommunications sector’s impressive performance (benefiting from substantial investment in 4G and the development of industry informatization, and the market value management of low-market-cap listed companies) In 2015, the marginal effect of investment opportunities for the industry as a whole is expected to decrease. Looking forward to the fourth quarter of 2014 to the first half of 2015, we downgraded the industry rating to “prudent recommendation” in the previous weekly report, which will remain unchanged.
2. Core recommendation: continue to recommend the configuration of Dr. Peng/China Unicom, platform-based transformation enterprises (Gaohong, New Century-Digital Sky Domain, Star Network Ruijie, Yitong Century, Gosuncn), satellite communication/Beidou sector (information Wei Group, Higer Communications, Zhenxin Technology), and Kehua Hengsheng.
3. Maintaining optimism in three directions in the medium and long term:
1) Informatization and localization in the security field
Military Beidou/satellite communications: the first to promote China Chuangxin Testing (Xinwei Group), Higer Communications, and Zhenxin Technology.
Coastal defense informatization: safety on the water - island and reef surface monitoring (Hai Lanxin), safety under the water - (Great Wall Information, Zhongtian Technology, Tongguang Cable, Hengtong Optoelectronics).
Cluster private network: Eastern Communications, Hytera, Higer Communications.
2) Telecom change:
Dr. Peng: The continuous promotion of private capital access, the coordination of broadband/IDC resources, and the platform-based layout.
China Unicom: Business model innovation brought about by mixed ownership reform, fixed network/LTE integration advantages, and centralized IT system reform.
3) Transformation: The first priority is to build a platform-based enterprise.
Gaohong Co., Ltd. - to build two online platforms for recharge/card exchange and payment of 100 billion space;
New Century - Digital Tianyu backdoor, hundreds of millions of multinational application distribution platform;
Gosuncn - building an open cloud platform for video surveillance and integrated planning of intelligent transportation/smart city;
Star Network Ruijie - the promotion of the localization of the "Micro Sentinel" platform for university informatization and the data communication equipment market;
Yitong Century - the layout of mobile digital marketing platform.
2015 wireless investment outlook, and indoor coverage SmallCell welcomes explosive opportunities
The three major operators continue to promote the construction of LTE. China Mobile has completed the commercial use of 400,000 LTE base stations, and the FDD test cities of China Telecom and China Unicom have also expanded to 40 cities. With the continuous expansion of LTE construction scale and the continuous advancement of construction rhythm, investment opportunities in the field of indoor coverage and wireless network optimization that benefit from the post-4G investment period have begun to emerge in the entire industry chain.
Taking China Mobile, the main player in 4G investment, as an example, the overall investment intensity in 2015 is not expected to weaken, and the goal of accumulatively reaching 1 million LTE base stations will not be reduced. In 2014, the investment in wireless main equipment was about 40 billion yuan, and in 2015, it is expected to increase by 0 to 10%; with the later construction of base stations, the number of sites will be less, so the supporting investment of LTE base stations will increase, which is expected to exceed 40 billion yuan; correspondingly, the investment in the supporting wireless bearer network will remain flat at about 65 billion yuan, but the investment in the main equipment will increase slightly.
According to the rhythm of LTE network investment and construction, 2014-2015 was the LTE network major construction, corresponding to 2015-2016, which was a substantial increase in investment in indoor coverage and wireless network optimization.
Indoor coverage: With the progress of the operator's LTE scale construction, after completing the basic network coverage in 2014, the operator will focus on strengthening the residential and indoor coverage of shopping malls, hotels, office buildings, and important group customers from 2015 to achieve seamless network coverage Coverage and deep coverage improve user experience. In the LTE networking, the macro cell (Macro Cell) serves as the main force to provide the basic coverage of the network; while in key buildings and large buildings, the small cell (Small Cell) needs to be used to cover the cells and indoors to achieve the coverage of the macro cell. supplement.
In the initial stage of LTE network operation, the main goal of the operator is to build a large-scale macro cell (Macro Cell) cell to obtain the largest possible geographical coverage. With the increase of users, the macro cell is divided into cells and becomes smaller and smaller. At the same time, the coverage blind area of the macro cell still exists, and the high traffic volume in the hotspot area cannot be carried. Cell) technology was created to solve the above problems. The application of Microcell mainly has two aspects: one is to improve coverage, and it is applied to some blind spots that are difficult to be covered by macrocells, such as subways and basements; the other is to increase capacity, which is mainly used in high traffic A large number of areas, such as bustling commercial streets, shopping malls, stadiums, etc.
Microcell is a form of small cell. Small cell gradually evolves on the basis of Femtocell technology, integrating Femtocell (for home scenarios), Picocell (for large office scenarios), and microcells (Microcell) and distributed wireless technologies (such as RRH remote radio technology). Today, with the popularity of WLAN, the home-oriented Femtocell is also upgraded to Nanocell (integrated with WLAN).
Taking China Mobile as an example, in 2014, the small cell (Small Cell) provincial pilot project achieved good results. The total investment is estimated to be no less than 400 million yuan; it is expected that in 2016, Small Cell (Small Cell) will have an inflection point and achieve explosive growth, and the investment scale will at least double to more than 1 billion yuan. Judging from the current test situation, Jingxin has the best test results due to 4-5 years of technical accumulation, followed by ZTE, Datang, Sanwei, Sanyuanda, Bangxun, etc., and once the industry grows significantly, related companies will All will benefit, so investment opportunities in the indoor coverage area are worthy of attention.
Wireless network optimization: Including network optimization platform, road test instrument, road test terminal, etc. (Century Dingli, Nuoyou, Huaxing Venture, etc.), China Mobile's wireless network optimization investment in 2014 was 1.0-1.5 billion, with the advancement of LTE construction rhythm With the deepening of network coverage, optimizing LTE network quality and improving user experience will become the focus of operators' next step in LTE network work. It is expected that the investment in wireless network optimization will increase by more than 25% in 2015, especially in network optimization services. (Yitong Century, Century Dingli, etc.).
Inventory of future stock opportunities
The key driving forces for the 2014 performance of the communications industry are two aspects: 1) Benefiting from the large investment in 4G and the development of industry informatization, the overall performance of the communications industry has a clear trend of bottoming out and rebounding in 2014; 2) Listing with low market value (especially low circulating market value) The company's market value management, combined with the substantial increase in M&A transformation transactions in the TMT field (the first half of 2014 is more than the full year of 2013), led to a substantial increase in valuation.
Combined with the current circulating market value and dynamic valuation level, the driving forces of the above two aspects are expected to significantly reduce the marginal effect of investment opportunities in the industry as a whole in 2015. Therefore, looking forward to the fourth quarter of 2014 to the first half of 2015, the current overall outlook for the industry is "neutral". Considering that the average net profit growth rate of individual stocks in the telecommunications industry in 2015 is expected to be 28%, especially the average 2015 dynamic PE of stocks with a 50% increase in 2014 is 27 times, and the market value management of listed companies is still sustainable. Callback, choose the opportunity to raise the industry outlook.
Dr. Peng/China Unicom, platform-based transformation enterprises (Gaohong, New Century-Digital Horizon, Gosuncn, Xingwang Ruijie, Yitong Century), satellite communication/Beidou sector (Zhongchuang Telecom-Xinwei Group, Higer Communications, Zhenxin Technology), and Kehua Hengsheng (focusing on the progress of stock option grants) are worth tracking.
The communication industry continues to be optimistic about three directions in the medium and long term:
1. Informatization and localization in the security field:
(1) Beidou/Satellite Communication Sector: The Beidou industry is at the critical point of accelerating growth with a penetration rate of 10%. At the same time, national defense informatization, social security management and control, and industrial upgrading all provide a huge boost to the development of the Beidou industry. We prefer Higer Communications, Zhenxin Technology, which have obvious advantages for military use, and UniStrong, Huali Chuangtong, Beidouxingtong, etc.
In the satellite communication sector, Xinwei Group (backdoor China Chuangxin Testing) is the first, followed by Higer Communications, Zhenxin Technology, and Huali Chuangtong.
At the same time, for the theme of national defense informatization, we also continue to pay attention to the new investment opportunities of Hailanxin, Fiberhome Electronics and Minfufa.
(2) Informatization of coastal defense: safety on the water - monitoring of islands and reefs, we continue to be optimistic about Hailanxin in the medium and long term (the new shipping policies introduced by countries benefiting from the civilian ship market are expected to accelerate and improve, which will benefit the marine electronics business); safety under the surface - Judging from the progress of Vietnam's purchase of 6 Kilo-class submarines from Russia and the recent intense anti-submarine confrontation between China and the United States, it is imminent to speed up the submarine submarine surveillance network (undersea fiber optic array monitoring) in the South China Sea. The potential market space is 100 billion, and the focus is on Data analysis and processing, junction box, submarine cable and other fields, focusing on Great Wall Information (primary target), Zhongtian Technology, Tongguang Cable, Hengtong Optoelectronics.
(3) Cluster private network: The social and economic development background of smart cities and industry informatization, as well as the social instability caused by violence, terror, and the gap between the rich and the poor, will promote the private network to ensure social security to enter a stage of sustained and rapid development. Continue to be optimistic about Eastern Telecom and Hytera in the medium and long term.
2. Telecom change:
(1) Dr. Peng: It occupies nearly 8 million broadband user resources in first- and second-tier cities (expected 10 million in 2015), and is expected to gain a new understanding of the value in the future competition for home entrance; at the same time, IDC data center resources are coordinated, cloud, management, terminal Steady progress in planning and layout
(2) China Unicom: In the short term, the mixed-ownership reform process and its resulting asset revaluation and the elimination of A-share discounts brought about by Shanghai-Hong Kong Stock Connect. In the medium and long term, China Unicom is due to asymmetric regulatory policies, fixed-line broadband/LTE integration Business competitive advantage, centralized decision-making/IT business system to cope with mobile Internet business changes, and mixed ownership promote the improvement of governance capabilities in four levels.
3. Transformation platform enterprises:
(1) Gaohong Co., Ltd.: In the future, the core is optimistic about the company’s two 100 billion turnover platforms. The platform I will focus on in the short and medium term: around the data traffic package operation and comprehensive card exchange in the phone bill recharge/layout, the current online third-party recharge market is thousands of dollars. More than 100 million, the potential market is expected to be 500 billion in a few years, High Yang is the leader, and the industry concentration is also increasing due to the scale effect. It is expected to exceed 60 billion annually, and the card collection business will change from simply receiving recharge cards to comprehensive card exchange - the business scale will also be expected to reach 10 billion in two years from 4 billion in 2013 (gross profit margin is 1.5%). Platform 2 to focus on in the medium and long term: 19 Payments owned by Hiyang Jiexun (holding a third-party payment license), and 19yi, which is also controlled by Hiyang Jiexun executives (public disclosure: 12 years of loss and divestiture, 2014 years Turning losses into profits in half a year) Nearly 500,000 offline outlets (30 billion in transaction volume in 2013, and 60 billion expected in 2014). In the future, in-depth business synergy, from POS acquisition-clearing to virtual electronic product marketing cooperation, is expected to create another larger The 100 billion-level flow platform. At the same time, the remaining 600 million funds (actually 1 billion, after deducting 400 million for supplementary working capital) from the last additional issuance on the book are also worthy of attention.
(2) New Century (Digital Sky Domain backdoor approval is underway): a mobile Internet application distribution channel platform enterprise with hundreds of millions of users and successful multinational development.
(3) Gosuncn: Good transformation achievements have been made, and the growth trend of performance in the next two years will be good. We are optimistic about Gosuncn’s layout around smart cities, smart transportation and smart homes.
(4) Star Network Ruijie: There is a lot of room for foreign investment in the field of switch pole/router network equipment, and the university informatization "Micro Sentinel" platform has potential realization value as an Internet portal.
Others: In the 4G sector, based on the investment plans of the three major operators, the wireless network investment will maintain a high level of prosperity and rapid growth in 2014 to 15 years, and there are still investment opportunities in communication equipment and its supporting fields in 2015. Focus on the IDC related supporting facilities sector (computer room power, the core focus on Kehua Hengsheng, followed by Zhongheng Electric/Kstar), and the 4G indoor coverage and network maintenance optimization sector (focus on Hong Kong stocks Comba Telecom, Sanyuanda, Century Ding) benefits, 3D communications, etc.).
(This article was jointly published by Zhu Jinsong and Xia Lusheng, analysts in the communication industry of Galaxy Securities)
Author: Global Tiger Finance
Copyright belongs to the author. For commercial reprints, please contact the author for authorization, and for non-commercial reprints, please indicate the source.