China Telecom's 5G pan-entertainment platform covers “buy” ratings for the first time
The company is the only A-share listing platform under China Telecom, and it is also the only A-share pure 5G Internet entertainment content operating platform with an operator background. In the 5G era, the industrial position of operators in the field of content production and distribution will be reshaped, and the company's three core business capabilities of cloud VR, UHD, and cloud gaming are more likely to become scarce content assets in the 5G eMBB scenario. As China Telecom's “vanguard” in promoting 5G services, the company is expected to receive full support from major shareholders and has a unique competitive advantage. At the same time, the company's traditional business has gradually shrunk, mixed reform expectations are strong, and 5G new entertainment business capabilities have taken shape and will usher in accelerated development. We expect net profit attributable to the parent in 2019-2021 to be 128/233/661 million yuan respectively. The corresponding EPS will be 0.16/0.29/0.83 yuan/0.83 yuan/share respectively, and the corresponding PE will be 145.03/79.30/28.01 times respectively. This is covered for the first time and given a “buy” rating.
5G implementation, increased telecommunications, and eMBB entertainment applications were the first to benefit
2020 is a big year for China Telecom to promote its 5G business. It plans to achieve the development goals of 60 million 5G terminals and 3 million VR terminals through simultaneous development of terminals+applications. At the same time, China Telecom also proposed strategic guidelines for “no platform, no ecology, no applications, no terminals”, clarifying the integrated development strategy of terminals and content, and taking a two-pronged approach to ensure the rapid advancement of 5G services. As the only 5G application carrier platform under Telecom, the company has now undertaken the development and operation of the three major 5G pan-entertainment commercial products of 5G+ ultra-high-definition video, 5G+ cloud gaming, and 5G+ cloud VR. The company's pan-entertainment applications, as the eMBB business pioneered in 5G, will fully benefit from the rapid advancement of China Telecom's 5G strategy.
It has four core advantages. The 5G Pan-Entertainment Scarce Platform Yangfan Sailing Company has unique four core competencies of “cloud network+user+content+channel”. It has remarkable advantages in 5G pan-entertainment content distribution and operation, which is expected to reshape the business model and enhance its position in the industrial chain. The company has formulated development planning guidelines for 2019-2021: the company's entertainment sector revenue will increase from 48% in 2018 to 70% in 2021. Among them, New Entertainment's big video business, CXP business, copyright business, etc. will account for 75%. Currently, the company is targeting the above three products with the goals of operator number two, operator first, and industry number one, respectively, and aggregating resources to build a new 5G content ecosystem platform.
Risk warning: 5G business promotion falls short of expectations, industry competition intensifies, mixed reform plans fall short of expectations, etc.