Event Overview: On June 29, 2022, Pingzhi Information issued an announcement and signed a “Cooperation Agreement on Jointly Promoting the Metaverse Industry” with Unicom Lingjing Video and Kuaishou to jointly promote the application of achievements such as VR/AR, enterprise digital employees, family digital members, and digital twins in related scenarios to jointly promote the implementation of the metaverse industry.

Three parties join forces to promote the implementation and transformation of metaverse products

Unicom Lingjing Video leverages its channel advantages: relying on individual, family, and business users, it implements metaverse products in the fields of video, music, reading, home internet, etc., and is deeply integrated with 5G messaging and video ringtone services.

Kuaishou makes full use of its previous technology accumulation and R&D experience: Relying on its technical advantages and product application implementation and optimization experience in the fields of VR/AR, digital virtual people, etc., it supports the development of metaverse products such as digital employees, family digital members, virtual images, etc., and uses the advantages of Internet platforms to promote them.

Pingzhi Information utilizes platform advantages and content advantages: as a comprehensive supplier to the communications industry, it connects channel resources, complements the company's sales team to discover users; develops a new path for the three-dimensional Internet literature industry with IP as the core, provides entertainment content for metaverse products, and jointly develops other metaverse products, including virtual conference rooms.

Left-handed operator, right-handed Internet, from concept to product, the metaverse has gradually landed. The company has collaborated with operators to explore the metaverse field many times before: 1) In November 2021, a strategic agreement was signed with China Mobile Virtual Reality and Datong Robotics to jointly promote the application of VR/AR, robotic metaverse, artificial intelligence, digital twins, etc. in specific downstream segments; 2) Jointly preparing the Xiaobang Cloud Project with China Mobile Hangzhou Branch to provide digital virtual person services to operator enterprise customers. After the pilot is successful, it will help the company open up China Mobile's digital virtual person market; 3) 2022 In March of this year, strategic cooperation was reached with Unicom and Xinhuanet to establish a joint metaverse laboratory to form a resource-sharing mechanism to enhance the influence of the industry. From strategic agreements to Little Fat Talk, virtual digital human pilots, to laboratory construction, the company's metaverse layout is beginning to bear fruit. Using operators' channel resources and customer advantages, it is expected to achieve a leap from fiction to reality, from concept to project pilot, and from product to industry.

As the second largest short video platform in China and the company with the third longest total time of mobile internet users in China, Kuaishou has built a mature comprehensive short video+live streaming business model. The company previously worked with operators to develop a differentiated layout, and this is the first time an agreement has been signed with Kuaishou, laying a good foundation for the company to enter the Internet enterprise metaverse field. Taking advantage of operators' channel advantages and leading Internet platform advantages to accelerate the popularization of metaverse concepts and promote the implementation of products such as virtual people, the company's metaverse layout can be anticipated in the future.

The penetration of gigabit broadband has accelerated, and there are sufficient orders in hand. The basic market is solid. As of May 22, the number of 10G PON ports nationwide reached 10.39 million, and the number of gigabit broadband users reached 5591 million (penetration rate over 10%), all exceeding the 2023 construction target planned by the Ministry of Industry and Information Technology (the number of 10G PON and above ports exceeded 10 million by the end of 2023, and the number of gigabit broadband users exceeded 30 million). By the end of '21, the company's smart home had won 9.722 million bids, 5,233 million unexecuted orders, added 881 million new orders in January-January '22, and won 904 million for 5G communications. Adequate growth in on-hand orders can be expected.

Investment advice: We believe that the company will benefit from the certainty of performance brought about by the gigabit boom in the short to medium term, and the long-term metaverse is expected to open up room for imagination. The company's net profit for 22-24 is estimated to be 372 million/550 million million/740 million yuan respectively. The PE multiplier corresponding to the current market value is 15X/10X/8X, and the company's valuation center for the past 5 years is 28 times. Maintain “recommendations”

ratings.

Risk warning: The progress of the metaverse falls short of expectations, increased market competition, etc.