Report summary

News events:

On March 28, 2023, Pingzhi Information announced that its subsidiary Shenzhen Zhaoneng Xuntong Technology Co., Ltd. was selected as a candidate for the 2023 all-optical WiFi device selection project of China Mobile Communications Group Shandong Co., Ltd. The winning share was 30%, and the amount of tax included in the selection was approximately RMB 389.24,400.

Anchor the operator's core equipment supplier and won the bid for Mobile's 2023 all-optical WiFi device selection.

Since its establishment 20 years ago, the company has always focused on communication operators. Currently, it mainly focuses on smart home business, supplemented by 5G communication services and mobile reading services, and has become the core supplier of equipment and content for communication operators. The company successfully won the bid for this FTTR project, laying a solid foundation for the company's subsequent large-scale procurement of FTTR equipment from the three major telecom operators, which is conducive to the company's in-depth participation in the operators' “double gigabit” network construction. According to the Broadband Development Alliance's “FTTR Fiber-to-Room White Paper (2022)”, there are 460 million households in China. It is estimated that around 159%-20% of households will be converted to FTTR during the 14th Five-Year Plan period. The total renovation space will exceed 130 billion yuan, and the company's smart home business prospects are broad. By the end of September 2022, the company's smart home business orders were full, with unexecuted orders of about 8.487 billion yuan.

Keep up with operators' strategic plans and actively enter the fields of 5G communication and distributed energy storage.

In response to policy calls such as the “5G Application “Sailing” Action Plan (2021-2023)” and the “14th Five-Year Plan” Information and Communications Industry Development Plan, the “14th Five-Year Plan”, the company officially entered the 5G communication business in July 2021. Currently, 5G base station antenna products have been shipped on a large scale, and the company continues to increase its investment in R&D of 5G communication products. As of the end of June 2022, the winning bid amount for this business was about 1,033 million yuan. With the integration of operators' cloud networks and the construction of computing power infrastructure such as “double gigabit”, the 5G communication business is expected to become a new engine for the company's growth. Furthermore, by digging deeper into the needs of operators and re-exploring customer resources, the company focuses on the field of energy storage. In July 2022, a cooperation agreement was signed with Yineng Energy to jointly build a distributed energy storage cloud platform, which will develop and operate tens of millions of communication base station power backup and energy storage systems for communication operators.

The AI era holds a huge amount of high-quality Chinese corpus, and forwards the metaverse with operators and internet giants.

Under the wave of artificial intelligence led by ChatGPT, China's large-scale model technological innovation is facing mainstream data sets mainly in English, lacking resistance from Chinese characteristics and culture, and there is an urgent need for a large number of high-quality Chinese corpus and materials. The company has been deeply involved in the digital reading industry for more than ten years, cooperating with copyright parties such as publishing agencies, media, and individual authors to aggregate a huge amount of high-quality text and audio reading content. By the end of June 2022, the company had more than 60,000 high-quality text reading products of all kinds, and more than 37,000 original works by signed authors, which is expected to transform into one of the company's core competencies in the AI era. Furthermore, the company relied on the channel advantages of its main business to enter the metaverse from the field of communication operators, and at the same time collaborated with leading Internet companies to embrace innovative technology. Cooperation agreements have now been signed with China Mobile, China Unicom, Xinhuanet, Kuaishou Technology, and Dacao Robotics, and has made key arrangements in the field of virtual digital people.

Investment advice:

The company has always focused its business around domestic telecom operators and has become the core supplier of equipment and content for communication operators. The policy-guided “double gigabit” network development wave has provided important opportunities for the company's smart home and 5G communication business. At the same time, the company has been deeply involved in the digital reading industry for more than ten years and has a large amount of high-quality Chinese corpus, which is expected to become a new core competitiveness in the AIGC era. We expect the company's revenue for 2022-2024 to be 47.09/5543/6.556 billion yuan respectively, and the net profit of the mother is 293/356/415 million yuan respectively. Corresponding to the current stock price PE is 21/17/15x respectively, covered for the first time, and given a “buy” rating.

Risk warning:

The risk that R&D progress falls short of expectations, the risk of fluctuations in business performance due to changes in demand in the downstream market, the risk of international trade friction, etc.