Main points of investment
Operators have significant advantages in the early stages of 5G. We believe that ultra-high definition video, VR and cloud games will become the mainstream forms of entertainment in the future, and the media industry will develop "from plane to three-dimensional immersion era" and "from single scene to full scene era", with huge video streams at its core. Relying on their own traffic advantages, operators have a certain competitive advantage in content operation and ecological construction. We are optimistic about the profit improvement of operators in the context of increased 5G user penetration, as well as the early user accumulation of commercial products in the early stages of 5G.
The company launched 5G commercial applications, leading the industry. The company is China Telecom Corporation A-share only listing platform, is China Telecom Corporation content intensive operation center, has a strong resource endowment advantage. On October 31, 2019, the company's three major 5G commercial applications "Tianyi Ultra HD", "Tianyi Cloud VR" and "Tianyi Cloud Games"
Online, the purpose is to take commercial applications as a starting point, implement the "big video" strategy, use the telecom "cloud, management, and end" resource endowment, build an open large video entertainment platform, and complete the great transformation from "pipeline management" to "content management".
"Tianyi Ultra HD" is a comprehensive upgrade of Tianyi Video in the 5G scene, adding 4K and VR related content. The product focuses on red positive energy, children, quintessence and other vertical segments, introducing more than 500 nearly 1000 hours of video content.
"Tianyi Cloud VR" is the company's key VR content aggregation platform, with South Korea LG U+ to achieve strategic cooperation, the exclusive introduction of its VR content, is expected to break through 1620 hours of VR content and 20 VR games by the end of the year. At present, there is also some practice in the field of VR live broadcast, and it is in a leading position in the industry.
"Tianyi Cloud Game" can really achieve "click and play", download-free and installation-free experience. Gamepoch has been introduced as a deep partner of host cloud games and PC cloud games, which is expected to form "large and small screen" interaction and panoramic layout.
The company's mutual entertainment business has a certain periodicity, and it is currently at the golden inflection point at the end of 4G and the early stage of 5G. With the gradual increase of 5G user penetration, the company's performance is expected to reverse.
With the deepening of the mixed reform process, it is expected to enjoy the reform dividend. Recently, the state has frequently issued guidance documents for the reform of state-owned enterprises, and the process of mixed ownership reform of state-owned enterprises is expected to be accelerated. As China Telecom Corporation's scarce listing platform, the company is expected to continue to deepen the mixed reform process, further improve work efficiency and economic benefits, and fully enjoy the dividends of state-owned enterprise reform.
Profit forecast and investment advice. It is estimated that the EPS of the company from 2019 to 2021 is 0.33,0.46 and 0.70 yuan respectively. The company is one of the most pure 5G targets, is in a leading position in the 5G commercial field, and has the theme of "performance inflection point" and "mixed change expectation", covering and giving "overweight" rating for the first time.
Risk hint. The risk that the 5G business process is not as expected, the risk of intensified market competition, the risk that new business expansion is not as expected, the risk of core brain drain, the risk that the mixing process is not as expected.
