Since the second half of '13, especially since the 4G license was issued, 4G construction in mainland China has clearly accelerated. Mobi Development has become a major equipment vendor with the largest share of antenna systems and radio frequency base station subsystem products, and its share advantage has further expanded. In terms of production and supply, the company has also initiated multiple preparations. In addition to a significant increase in production personnel, it has also reached a strategic partnership with Agilent Technology Co., Ltd., a leading global testing and surveying company, to establish long-term cooperative relationships in equipment and technology such as testing and surveying to help the company expand its production capacity. Overall, driven by both supply and demand, we expect the company to achieve rapid growth in performance in 2014, or recover to the peak period of 3G construction and advance towards a profit of 100 million yuan.
The Ministry of Industry and Information Technology said at the end of April that the three basic telecommunication companies were studying the joint establishment of a telecommunications facility company and were responsible for overseeing the construction of telecommunication towers to further raise the common level of telecommunication infrastructure construction. As a result, the market is worried that related demand will shrink, which in turn has led to concerns about the growth of companies such as Mobi Development. However, as the mainland has just begun planning to establish a national tower company, it is estimated that the reduction in demand for steel towers is still a very long-term process. As a result, its impact in the short to medium term is still very limited.
MIMO technology will lead the company to new developments. Currently, there are only a few companies with MIMO technology and mass production in mainland China. There are only a few such companies, such as Huawei and Mobi. Most of the others are still in the initial R&D stage. Therefore, companies will have pioneering technological advantages. Second, in the 4G era, spectrum resources are expensive and limited, and the most effective way to improve network performance is multi-antenna technology (MIMO), especially shared base stations in the future, which is more likely to accelerate such progress. Again, MIMO antennas are highly profitable, and their cost is expected to increase by only a few percent, but prices have soared many times over.
Investment recommendations
4G construction has provided the company with an opportunity to return to growth. After turning into profit in 2013, the company's growth is expected to accelerate starting in 2014, and performance performance is worth looking forward to. In terms of valuation, the company's valuation has been declining since listing; previously, the net market ratio was even lower than 0.36 times. We believe that under the new market opportunities and competitive situation, the company's valuation is expected to return to a normal level. For the time being, we are allocating 1.1 times the book value of each share for 15 years. The target price is HK$2 for purchase ratings.
