First coverage, giving a “buy” rating. Consider the value of a company from two points:
1. Scarcity: The company is an established private network equipment manufacturer with a history of more than 15 years. Its products cover many private network segments. After years of development, the company has become the only domestic enterprise that can provide a complete 4/5G communication solution other than Huawei, ZTE, and Nokia Bell, and has become one of the few manufacturers in the world with the ability to supply core network equipment.
2. Growth: With the upgrading of private networks under the 5G wave, operators paying more attention to and promotion of network slicing/private networks, and operators' diversified demand for 5G suppliers under the current international situation, the company's public network/private network business lines are expected to achieve new breakthroughs and growth.
We have been working on the private network for 17 years, and our products cover many fields. The company's private network products began with Xiaolingtong for mining. After 17 years of development, they have broken through the single coal mine private network market. The products cover many important fields such as government, public security, administration of justice, electricity, coal mines, etc. On this basis, the company used private network technology to break through the smart city market and obtained a large order of 62 million yuan for smart city construction in Turfan last year.
Precise positioning, breakthrough in public network business overseas. The company accurately positioned itself, pioneered new approaches, avoided the fiercely competitive domestic public network market, and made breakthroughs through overseas markets. The company has received core network orders from BSNL, one of India's top four operators, for many years in a row, and its share of BSNL core network orders is basically the same as that of Huawei. In terms of access networks, the company accurately positioned the copper cable market into SoftBank's supply chain. Since then, the company's share of optical fiber access products has continued to increase, successfully stabilizing the company's market position in access networks.
Private network replacement+supply chain security, public affairs and a period of opportunity. Recently, the international situation continues to be turbulent. Major regions of the world, including the European Union, require operators to expand the degree of diversification of 5G equipment suppliers. The company's communication equipment relies on its own channels and the UTStarcom channel of established manufacturers, and is an excellent alternative supplier under the diversification trend. At the same time, the company's private network business is expected to benefit from the direct upgrading of China's private network from 3G to 5G, combined with the company's own 5G technology reserves, thus achieving another breakthrough in private network business.
Investment advice: We forecast the company's net profit to the mother in 2020-2022 to be 0.9/17/270 million yuan. The PE corresponding to the current stock price is 80/42/27 times respectively. Based on the company's scarce core competitiveness in core networks and other businesses, as well as the high growth and sufficient market space of future business, it was covered for the first time and given a “buy” rating.
Risk warning: The overseas epidemic continues to spread, and the company's new technology research and development falls short of expectations.
