The leader in digital reading market segment, transforming communication hardware equipment provider. The company has been deeply engaged in the digital reading industry for more than ten years, and has a large amount of high-quality digital reading content. as of 2022H1, the company has more than 60000 copies of all kinds of high-quality text reading products and more than 37000 original works by the authors. Relying on its own original reading platform + CPS model, and expanding both content and channels, the mobile reading business has achieved steady growth, with a gross profit margin of more than 20% in the past five years, and a high gross profit margin is expected to contribute stable cash flow to the company. Based on the mobile reading business, the company achieved a "from 0 to 1" business breakthrough by acquiring a 51% stake in Shenzhen Zhaoneng to layout the smart home and communications equipment market in 2019, which will provide a major driving force for the company's future growth.

Driven by the "double gigabit" wave, the growth momentum of the company's network terminal equipment + 5G communication business is abundant. The "double gigabit" network, represented by 5G and gigabit optical network, is an indispensable "two wings" and "double wheel" for the construction of manufacturing power and network power. in recent years, the whole industry has accelerated the construction of "double gigabit". The supply capacity of social digital transformation is constantly improving. Under the double gigabit wave, the network terminal equipment + 5G communications market will fully benefit. Centering on the "gigabit optical network", the company has carried out a comprehensive upgrade iteration of intelligent home gateway, intelligent set-top box and other broadband network terminal equipment, while creating an omni-directional WiFi6 routing solution, Wi-Fi6 router products to achieve batch shipment, network terminal equipment performance growth with high certainty. In addition, the company entered the field of 5G communication equipment in 2021 and raised 585 million yuan in December 2021, focusing on expanding 5G wireless access network core products, new generation bearer network products, R & D center construction and supplementary liquidity. Won the bid China Mobile Limited multi-band (including 700m) antenna product centralized procurement project, China Mobile Limited 444 antenna and single 4 antenna (including 700m) product centralized procurement project, China Mobile Limited 2022 base station antenna centralized procurement project and so on. The fixed increase + 5G antenna expands the layout of 5G end-to-end industry chain and is expected to make a breakthrough in the future.

With the rapid development of smart family business, Shenzhen Zhaoneng orders have landed intensively, laying the foundation for the growth of the company.

The company relies on the subsidiary Shenzhen Zhaoneng to carry out smart family business, and the main customers of smart family business are the main domestic communication operators. Shenzhen Zhaoneng has established an in-depth mutually beneficial cooperation model with communication operators by virtue of complete qualification certification, leading technological advantages, high-quality product system, perfect marketing network and so on. The company's smart family business series products are the first echelon suppliers of China Mobile Limited and China Telecom Corporation. Shenzhen Zhaoneng continues to win bids on smart home terminal products such as smart home gateways and intelligent set-top boxes of communication operators. by the end of June 2022, Shenzhen Zhaoneng has won a cumulative bid of about 11.53 billion yuan and outstanding orders of about 5.962 billion yuan. the share of the company's products among operators has further expanded, and the growth momentum of smart home business in the future is strong.

Deep ploughing operator meta-universe ecology, distributed energy storage is expected to open up new growth. The company entered the bureau with communication equipment technology, and recently began to layout meta-universe-related products. The company has massive and high-quality digital copyright resources, which can transform the content operation of the virtual world in the future. In addition, the company already has home VR equipment and virtual digital human products. Combined with the channel advantages of the company's business, the company intends to cut into meta-universe from the field of communication operators, with Internet leading enterprise Kuaishou Technology technology to jointly layout meta-universe. The company has signed cooperation agreements with China Mobile Limited, China Unicom, Xinhuanet, Kuaishou Technology Technology and Dahu Robot, and has made a key layout in the field of virtual digital human. The company has provided "Xiao Pang Shuo Yun" virtual digital human service for Zhejiang Mobile Hangzhou Branch. Zhejiang Mobile Hangzhou Branch can use virtual digital human Xiao Pang to explain cloud service content to customers, and the company's virtual digital human products begin to move towards marketization. In addition, Shenzhen Zhaoneng, a subsidiary, has launched a split VR portable glasses model for ZNVR-C07, which meets the technical requirements of operators and is now commercially available, and China Mobile Limited's storage will be completed in October 2020, and will be collected through operators to participate in the supply channels of operators. In addition, the company signed a cooperation agreement with Zhejiang Yineng Energy Service Co., Ltd. to jointly develop a distributed energy storage cloud to carry out comprehensive and in-depth cooperation around the distributed energy storage cloud. As the main development direction of the power industry in the future, distributed energy storage cloud has broad prospects for development. The signing of the agreement is conducive to the effective extension of the company's industrial chain, and cut into the track of comprehensive utilization of new energy, and is expected to become a new important profit growth point.

Investment suggestion: on the basis of mobile reading business, the company has entered a stage of steady development, content research and development + channel expansion to facilitate the steady growth of business; taking advantage of the rapid expansion of 5G new infrastructure and "double gigabit" network, vigorously develop smart family and 5G communications business, become the main growth momentum of the company in the future; at the same time, cut into the meta-universe market and actively layout the distributed energy storage track. We estimate that the income of the company from 2022 to 2024 is 45.21 / 54.41 / 6.569 billion yuan, and the net profit is 3.28 / 4.24 / 544 million yuan, corresponding to EPS 2.35 / 3.04 / 3.90 yuan. It will be given 14 times PE in 2023, corresponding to a 12-month target price of 42.56 yuan, giving a buy-An investment rating for the first time.

Risk tips: smart family business development is not as expected, order winning is not as expected, meta-universe progress is not as expected, market competition aggravates the risk.