On July 2, Futu News reported that $ZHONGGAN COMM (02545.HK)$Today's pre-market opened low and closed down 35.2%, at HK$0.81, with a turnover of HK$4.9744 million and a total market capitalization of HK$518 million. Each lot contains 2,000 shares without considering handling fees, with a loss of HK$880 per lot.
Market source: Futu Securities >
Investment highlights
As a well-known enterprise in the region, Zhonggan Communication has been expanding its scale. In 2023, it ranked third among all telecommunications network infrastructure construction and maintenance service providers in Jiangxi Province, with a market share of about 3.1%. Zhonggan Communications has established long-term and stable business relationships with China's three major telecommunications network operators and the world's largest telecom tower infrastructure service provider. Its business covers 25 provinces, municipalities and autonomous regions in China.
The demand in the industry is surging and there are bullish policies: the overall investment in Jiangxi Province's telecommunications infrastructure construction has increased from approximately RMB 9.1 billion in 2019 to approximately RMB 11.4 billion in 2023, with a compound annual growth rate of about 5.8%. Thanks to the favorable policies of Jiangxi Provincial Government to promote digital transformation, the overall investment in Jiangxi Province's telecommunications infrastructure construction is expected to continue to grow at a compound annual growth rate of about 3.3% from 2024 to 2028, exceeding the national compound annual growth rate of about 2.8%.
Risk warning
The high concentration of customers leads to business risks: during the previous reporting period, most of Zhonggan Communication's revenue came from its projects in Jiangxi Province. The group's business and economic condition are closely related to Jiangxi Provincial Government policies and the resources and budgets invested by the group's major clients in Jiangxi Province. Any policy changes in Jiangxi Province or a reduction or loss of business from the group's major clients could have a significant and adverse impact on the company's operations and financial condition.
There is a high dependence on projects, which poses execution risks: Zhonggan Communication operates based on non-recurring and per-project basis. Failure to obtain new projects may have a significant impact on the company's business and operating performance. Because the company's telecommunications infrastructure service projects are usually awarded by public tender, the winning rate is affected by market competition, cost control and other factors. If the company cannot continue to obtain new projects, it will directly affect its future growth and profitability.
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Editor/Jamie