Event Overview:

According to the company's announcement on the evening of April 11, the company signed a strategic cooperation agreement with the “National Key Laboratory of Space and Earth Integrated Business Network” (ISN National Key Laboratory) of Xi'an University of Electronic Science and Technology to meet the development needs of the satellite Internet and low-altitude economy industries, and decided to jointly establish a “Xidian-Putian Technology (Tiandi Integrated Ubiquitous Information Network) Joint Laboratory” by integrating their respective advantages in terms of resources, technology, talents, platforms, etc. The agreement is valid for three years.

Analytical judgment:

Satellites and terrestrial networks are deeply integrated. The era of integration of heaven and earth is coming, the era of deep integration of satellites and terrestrial networks is coming, and the era of integration of heaven and earth has arrived. In the 6G era, the advantages of satellite communication in terms of coverage, reliability and flexibility can make up for the shortcomings of terrestrial mobile communication, connect multi-dimensional space in the air, sky, ground, and sea to form an integrated ubiquitous network pattern, provide users with a more reliable and consistent service experience, and reduce operator network deployment costs. According to the “White Paper on Space-Earth Integrated Network Technology for 6G” published by the China Mobile Think Tank, the existing terrestrial network covers only about 20% of the Earth's surface area, covering less than 6% of the Earth's surface area. To provide seamless global coverage services, satellite networks need to complement the terrestrial network to jointly build a full-space three-dimensional communication network covering land, sea, air, and space. With the continuous evolution of 3GPP5G non-terrestrial network technology (NTN) and 6G space-ground integrated technology, satellite and terrestrial networks are gradually forming a trend of deep integration. It can be said that a space-earth integrated ubiquitous information network is a deep-integrated communication infrastructure with the integrated development of cellular networks and satellite networks, seamless global coverage, organic integration of remote navigation, and ubiquitous connectivity in all scenarios. It will achieve an “always online, never lost connection” application experience.

Satellite communication and cellular communication go both ways. Currently, satellite operators have used direct mobile phone connections to accelerate integration into terrestrial networks. For example, SpaceX cooperated with T-Mobile in the US to launch the Starlink direct mobile phone service; AST SpaceMobile cooperated with US AT&T operators to achieve two-way voice calls through the use of BlueWalker3 satellites; and Lynk has signed commercial agreements with more than 30 mobile operators around the world for direct mobile phone satellite services. From a market perspective, there is a large market space in fields such as vehicle networking, ubiquitous low-altitude networking, operators' trips to the sea, emergency disaster relief, broadband communication for large-scale vehicles, marine coverage, and remote land coverage. Currently, the Tiandi Integrated Information Network still needs breakthroughs in technology such as network architecture, frequency resources, air port transmission, and terminal capabilities. In January of this year, seven departments including the Ministry of Industry and Information Technology issued the “Implementation Opinions on Promoting Future Industrial Innovation and Development”, which clearly included the integration of heaven and earth as the core area of future industries in China.

Putian Technology is a leading enterprise in China Telecom's communications sector. It actively lays out satellite internet and low-altitude economy. As the largest shareholder, China Power Grid Communications, is the “national team” for the development of the telecommunications industry of the Telecom Group. According to the company's response on the interactive platform, the company is currently actively tracking 6G-related technology. Facing the future, the company will continue to use the core advantages of terrestrial communication (public network mobile communication, private network cluster communication, etc.), actively lay out emerging tracks such as satellite internet and low-altitude economy, form a product and capability system covering integrated space and ground communication solutions, and create new quality productivity and new momentum.

In the field of satellite Internet, the company participated in satellite Internet networking research and standard setting. According to the company's response on the interactive platform, the company actively plans and lays out the development of the satellite Internet industry. The China Communications Standardization Association (CCSA) participated in research and standard setting for collaborative networking under various air, sky, and terrestrial models; and actively promoted research and development of related technologies and products. At the same time, the company has further strengthened innovation investment and empowerment, and stepped up efforts to promote the iterative upgrading of products such as high-end PCB products, thermostatic crystal oscillators, and Beidou terminals. In addition, the company is also actively promoting the integration of space and space into private network communication applications for emergency and other industries. Considering the company's obvious advantages in the field of wireless private networks in the terrestrial industry, after achieving integrated networking between heaven and earth in the future, it can provide industry users with more efficient, secure, and resilient private networks.

In the field of space, the company lays out 5G core networks, small base stations, repeaters, and industry terminals. The development of the low-altitude economy is inseparable from stable and efficient communication network support. The construction of low-altitude networks and 5G-A has spawned the need for base station construction, transformation, and upgrading. According to the company's response on the interactive platform, the company will rely on technology accumulation in the communications field, follow up the development of the low-altitude economy industry, and actively promote research on key technologies and products for low-altitude communication. In addition, in recent years, the company has continued to invest in 5G core product research and development. It has formed a series of products and solutions such as core networks, small base stations, repeaters and industry terminals, and continues to follow up research on key technologies such as 5G-A, while actively following up and participating in 6G-related standard research.

Key Laboratories in the Information Field, focusing on the “Frontier Field of Aerospace Technology” and the “Forward-Laying 6G Network Technology Reserve” National Key Laboratory in the Information Field, with rich product and technical reserves. Xi'an University of Electronic Science and Technology is one of the first universities in China to establish majors in radar, information theory, microwave antennas, electronic mechanics, and electronic countermeasures. According to the official website of the ISN National Heavy Duty Office, the ISN National Heavy Duty Office approved the project in 1989, began construction in 1991, passed the national inspection and officially opened operation in 1995, and has passed four national assessments so far, and the 2017 evaluation is excellent. In 2022, the laboratory entered the first batch of construction lists of national key laboratories in the field of information through restructuring. The laboratory research site covers an area of 9,500 square meters and has 136 sets of large-scale instruments and equipment, with a total value of over 90 million yuan. It has multiple platforms: the “Open Model Definition Satellite Science Platform “Xidian 1”, the “Space and Earth Integrated Network Performance Evaluation and Test Analysis Platform”, the “B5G/6G Intelligent Network Test Platform”, the “Heterogeneous Fusion Network Security Test Platform”, the “Multi-modal Big Data Acquisition, Storage and Intelligent Processing Platform”, and the “High Performance Simulation and Cloud Computing Platform”.

A leader in the field of network communication, developed China's first fully autonomous space-grade high-speed image compression chip, breaking the international monopoly. In recent years, the laboratory has proposed a secure network coding theoretical system, determined the network capacity boundary for secure communication, and won the IEEE Eric Sumner Award for the first time in China; proposed high-capacity high-security networking technology for heterogeneous wireless networks, invented China's first international standard in the basic common field of information security, breaking America's monopoly position in the network information security industry; breaking through the space orbital intelligent information processing and transmission technology, and developed China's first fully autonomous space-grade high-speed image compression chip, breaking the restrictions on key foreign devices. An image compression and reconstruction application system in a series of major national projects such as high scoring, lunar exploration, and fire exploration has solved the urgent needs of information transmission and services in major national projects such as next-generation wireless communication systems, manned space navigation, and deep space exploration projects.

Helping satellite Internet technology test stars take off and build satellites defined by the “Xidian 1” model. The space field has achieved great results, participated in many satellite Internet technology test satellite missions, and built an autonomous and controllable integrated space-space and terrestrial network technology system. According to ISN's official website, on July 9, 2023, China successfully used the Long March 2C launch vehicle at the Jiuquan Satellite Launch Center to launch the satellite Internet technology test satellite. ISN's national heavy office is deeply involved in the research and development of related technologies in this test satellite. Subsequently, the laboratory also participated in the successful satellite Internet technology test satellite missions launched on December 6 and December 30, 2023. In the next step, the laboratory will continue to focus on the field of network communication, face the major needs of national satellite Internet construction, give full play to its advantages, promote breakthroughs in space-space integrated network information theory, carry out core technology research on space-space integrated networks over a large spatio-temporal span, and establish an autonomous and controllable space-space integrated network technology system.

The overall design of the “Western Power 1” open model defines a satellite to meet various information transmission needs. The “Xidian 1” satellite, which was designed by ISN's National Heavy Duty Office, is the first open model-defined scientific platform for spatial data sensing and network transmission in China. It will provide satellite designers, developers, and learners with a real platform for scientific experiments on satellites in orbit. The “Xidian-1” satellite was launched on February 27, 2022 at the Wenchang Space Launch Site in China. The star is equipped with a model-defined payload developed in the laboratory. Using an integrated design of computation and communication, it can process remote sensing data in real time and intelligently transmit remote sensing data in orbit. It is a hyperspectral remote sensing satellite. The star has characteristics such as high bandwidth, wide coverage, and low latency, and can meet the needs of users in various information transmission such as voice, data, and images. After the successful launch of the “Western Power 1” satellite, it played an important role in various aspects. Using the Red Sea remote sensing data taken by it, it analyzed and predicted the development trend and weakness of global shipping, and provided valuable references and suggestions for promoting China's industrial upgrading; the “Xidian-1” satellite actively served ecological environment protection in the Qinling region, carried out normalized monitoring and emergency response in key regions, effectively served ecological environment monitoring, safety and transportation, tourism, archaeology and cultural protection, etc., and provided technical support for users in a wide range of industries such as geographical information, financial insurance, safety, agriculture, etc.

Join forces to build a new pattern of integrated development between heaven and earth

We believe that the cooperation between Putian Technology and Xi'an University of Electronic Science and Technology is right, and it is hoped that both technological and industrial breakthroughs will be achieved as soon as possible, and a new pattern of integrated development between heaven and earth will be built. ISN's national office focuses on the field of network communications, targeting the “frontier field of aerospace technology” and “forward-looking 6G network technology reserves”, and has strong R&D and innovation capabilities. Putian Technology has been deeply involved in the field of communications for many years and has rich experience in industrialization, so this cooperation can be described as a strong alliance. According to the announcement, this cooperation between the two sides will establish an in-depth industry-university-research cooperation model, and the company will actively promote the transformation of joint laboratory results. The joint laboratory will focus on integrated ubiquitous information networks. The two sides will carry out joint research and cooperation in the direction of intelligent networking architectures, terminal development, system platforms and industry applications, jointly develop related products, and establish a comprehensive academic exchange, knowledge training, and technical guidance cooperation mechanism.

Investment advice

6G communication networks will achieve “high-speed ubiquity, integration of heaven and earth, and computing network integration”, and satellite Internet is the general trend. As the telecommunications industry development platform for the Telecom Group, China Power Grid Communications, the largest shareholder of the company, is the “national team” of the satellite communication business. This cooperation with ISN's national office is expected to further consolidate its advantages in the fields of satellite internet and low-orbit communications. We maintain our profit forecast. We expect the company's revenue for 2023-2025 to be $55.82/67.617 billion yuan, net profit to mother of 0.42/2.50/349 million yuan, and EPS of 0.06/0.37/0.51 yuan respectively. Corresponding to the closing price of 24.66 yuan/share on April 11, 2024, PE was 402/67/48 times, respectively, maintaining a “buy” rating.

Risk warning

Downstream demand fell short of expectations, and R&D progress fell short of expectations. In February 2020, the company was issued a warning letter by the Guangdong Securities Regulatory Commission due to flaws in internal control and insufficient preparation for bad accounts receivable.