The company is the first communication transmission system solution provider in China, and its products cover 3G/4G/5G macro base stations, small base stations, indoor coverage and other antenna and feeder equipment, as well as rail transit and other fields.
The company's main products include radio frequency coaxial cable, optical fiber cable (photoelectric composite cable), related accessories and Internet of things sensors, etc. it can provide antenna-fed system to main equipment signal, power and other overall connection and transmission solutions for mobile communication base stations, small base stations and indoor distribution systems. The company's mobile communication radio frequency feeder has ranked first in the country for nine consecutive years. At the same time, the company expands new business areas such as Internet of things sensors to form a complete product chain.
The company maintains long-term and in-depth cooperation with the three major operators and iron tower companies, and the relationship between major customers is stable. For 5G continuous R & D investment, launch a transmission solution for 5G.
The company's main customers include three major operators, China Tower Corporation, Huawei, ZTE, etc., of which the revenue of the three major operators accounts for more than 90%. The core customers such as the three major operators have maintained a cooperative relationship for more than 10 years, and the major customer relationship is stable. Product quality, performance, service and delivery capabilities are outstanding. Based on the forward-looking judgment of its own technology accumulation in the field of RF transmission for many years, the company has set up a R & D team with industry leading experts and about 200 people, continuously invested in R & D, and developed a series of related products for 5G transmission system products. with the 5G construction of the three major operators, it is expected to share the new increments brought about by 5G.
The 5G commercial license has been landed, and the scale construction is expected to start. The radio frequency transmission system in 5G era is expected to meet the double improvement of volume and price, and the company, as a leading manufacturer in the industry, is expected to benefit from 5G construction in the first wave.
In June 2019, the Ministry of Industry and Information Technology officially issued 5G commercial licenses to the three major operators and China Radio and Television, and the construction of the 5G network is expected to be accelerated after the license is landed. The deployment frequency band of 5G is higher, the density of macro base stations and small base stations is expected to increase significantly compared with 4G, and the demand for RF transmission system is expected to increase significantly.
At the same time, the introduction of new technologies such as Massive MIMO antenna in 5G brings a substantial increase in base station power consumption behind ultra-high rate signal transmission, and the corresponding transmission system specifications are expected to be improved, leading to a further increase in product value. As a leading manufacturer of radio frequency transmission system in China, the company's products are used in core links such as 5G base stations, and it is expected to benefit from the double improvement of the volume and price of the transmission system brought about by the construction of 5G scale.
4G network is expected to coexist with 5G for a long time, and the demand for 4G expansion and low-frequency re-farming brought about by the rapid growth of traffic is expected to last for a long time, bringing sustained and stable demand for the company's main products.
With the deepening of the policy of increasing speed and reducing fees and the vigorous development of mobile Internet applications, mobile network traffic continues to grow at a high speed, which brings great pressure to the existing 4G networks. The demand for operators to upgrade and expand the 4G network and to reduce the frequency of the low-frequency 2G/3G network to 4G is expected to last for a long time.
4G network is an important choice for operators to achieve low cost, large capacity and wide coverage, and it will coexist with 5G network for a long time. 4G network expansion and low-frequency re-ploughing construction will bring sustained and stable demand for the company's main products, which is another important pillar for the company's future growth.
Profit forecast and investment advice
With the landing of 5G license plates, China's 5G-scale commercial construction is expected to land quickly in 2019, while 4G network expansion and low-frequency re-farming demand is expected to continue for a long time, driving the company's performance from 2019 to a period of accelerated growth. It is estimated that the company's net profit in 19-21 is 4.3,5.9 and 840 million yuan respectively, and the compound growth rate of net profit in the next 5 years will reach 29%, corresponding to 5 times, 3 times and 2 times of price-to-book ratio in 19-21 years, respectively, which is significantly lower than the industry average. We conservatively estimate that the company's price-to-earnings ratio will rise to 10 times 2019, corresponding to the target share price of Rmb2.38 (about HK $2.70 at the current exchange rate of 1.1347).
Risk hint: operators have low expectations of capital expenditure and major customers rely on risk.
