The Zhitong Finance App learned that Tianfeng Securities published a research report saying that in terms of operating revenue, overall 24Q3 revenue for communication equipment increased 11.1% year-on-year, and resumed growth from 23Q4, and the 24Q1-24Q3 growth rate continued to accelerate, reflecting the completion of the switching between old and new kinetic energy in the industry, and AI computing power has become a new engine driving the growth of the industry. In terms of net profit, the overall 24Q3 net profit of communication equipment increased 18% year-on-year, a sharp reversal from -16% in 23Q3, reflecting the rapid recovery of industry profits under the switch between old and new kinetic energy. Tianfeng Securities continues to be optimistic about the AI computing power supply chain (optical module, PCB, GPU module manufacturing, switch, AIDC, etc.), liquid cooling and new applications (AI robots/AIPC/AI mobile phones, etc.), as well as the controller sector that benefits from offshore trends and domestic sea wind inflection points, and actively focuses on satellite/low-altitude progress.

Financial summary and analytical outlook:

Industry segments are worth focusing on:

1) Optical Devices 24Q3 revenue increased 90% year over year, 24Q1-24Q3 showed a high increase and accelerated growth trend, and Q3 net profit growth rate was +123% year on year, which also showed an accelerated growth trend. It may also reflect that global AI-driven demand for optical modules has fully entered high growth. Currently, it mainly benefits overseas, and is expected to benefit from the growth in domestic computing power demand in the future. The light of AI is expected to continue to grow rapidly, and the trend is expected to continue for many quarters.

2) The recovery trend of the Internet of Things continues, and revenue and profit are growing at an accelerated pace. 24Q3 revenue grew 27.2% year-on-year, with a revenue growth rate of more than 20% for three consecutive quarters, reflecting the recovery of the industry and continuing the trend of strong overseas demand. Benefiting from the recovery in market demand, IoT industry companies have shown strong growth. At the same time, cost control has achieved results, and profits have grown rapidly. In particular, leading companies in the controller field, Topbon Co., Ltd. and Heltai have all shown strong revenue and profit performance. This trend is expected to continue for many quarters.

3) Submarine Cable & Optical Cable 24Q3 revenue increased 13.9% year-on-year, mainly driven by the UHV and power grid intelligence and marine business sectors. Net profit to mother grew 18.7% year on year, reversing the downward trend, and the bidding schedule for all countries was tight in 2024. Looking ahead to the next few quarters, domestic demand is expected to recover and accelerate, and overseas demand continues to be strong. We expect the industry to continue to recover, and offshore wind power installations will grow steadily over the next few quarters and years.

4) IDC&CDN24Q3 revenue increased 11.8% year-on-year. Runze Technology, the leader in the intelligent computing center, performed well. AIDC demand is expected to continue to increase to drive the industry's leading manufacturers to continue to benefit. In the future, as domestic AI demand increases, the industry is expected to continue to benefit.

5) Operators' 24Q3 revenue increased 1.4% year on year. Recent quarters have shown a steady growth trend. Net profit to mother increased 5.3% year on year. Profit has been growing steadily for three consecutive quarters. The overall operation of the communications industry is steady. Looking forward to a steady increase in the next few years, the performance is expected to continue to grow steadily.

6) The 24Q3 revenue of main equipment fell slightly by 0.3% year on year. The industry is in a period of switching between old and new kinetic energy. Looking ahead to the next few quarters, I am optimistic that as the AI-driven share increases, revenue and profit will return to growth after AI-driven ICT demand continues to grow.

7) The satellite industry's 24Q3 revenue and net profit to mother fell 9.2% and 73.4% year on year; the main reason is that most of the downstream customers targeted by satellite internet are military units, which are greatly affected by military adjustments and personnel changes, but there is now a year-on-year recovery trend. The profit decline has narrowed year over year. After the first year of satellite internet began in '24, it is expected to drive the scale of industry demand growth.

Investment advice:

1. Growth category: 1) Continuing to be optimistic about the AI computing power supply chain (optical module, PCB, GPU module manufacturing, switch, AIDC, etc.) and liquid cooling and new applications (AI robots/AIPC/AI mobile phones, etc.); 2) Controllers that benefit from overseas trends and inflection points in domestic ocean winds, underestimated sea cables, offshore trends & head concentration trends; 3) Actively pay attention to satellite/low-altitude progress. 2. Steady category: operators (steady growth combined with high dividends).

I. Artificial Intelligence and Digital Economy:

1. Optical modules & optical devices, key recommendations: Zhongji Xuchuang, Xinyisheng, Tianfu Communications, Yuanjie Technology (electronic joint coverage); recommended focus on: Guangxun Technology, Solsky; Recommended focus: Dingtong Technology, Optical Bank Technology, Bochuang Technology, Shijia Photonics, China Porcelain Electronics (new material joint coverage), Mingpu Optoelectronics, Cambridge Technology, etc.;

2. Switch server PCB, key recommendations: Shanghai Electric Power Co., Ltd., ZTE, Shenghong Technology, Ziguang Co., Ltd. (joint computer coverage), Phillincoth; Recommended attention: Shengke Communications, Ruijie Network, Sanwang Communications, Yinghantong, Dongtu Technology, etc.;

3. Operators: China Mobile, China Telecom, China Unicom;

4. AIDC & cooling: Key recommendations: Runze Technology (joint mechanical coverage), Runjian Co., Ltd., Kehua Data (joint coverage of telecommunications), and Aofei data (joint computer coverage). Recommended attention: Invec (joint mechanical coverage), Guanghuan New Network, Gaolan Co., Ltd., Science and Technology Innovation Source, Shenling Environment (home appliance coverage), data port, etc.;

5. AIGC application, focusing on: Caixun Co., Ltd., DreamNet Technology.

2. Communications Outbound & Intelligent Driving:

1. Submarine cable: key recommendations - Hengtong Optoelectronics, Zhongtian Technology, Dongfang Cable (telecommunication coverage);

2. Overseas recovery & focus, key recommendations: Weisheng Information (joint mechanical coverage), Topband Co., Ltd., Heltai, Yilian Network, Shifang Communications, Guanghetong, Yiyuan Communications, etc.;

3. Intelligent driving: It is recommended to focus on: modules & terminals (Guanghetong, MeiGe Intelligence, Mobile Communications, etc.); sensors (Hanwei Technology & Sifang Opto-mechanical Joint Coverage); Connectors (Yihua Co., Ltd. (Electro-Electronics Joint Coverage), Dingtong Technology, etc.); structural parts & air suspension (Rima Precision), etc.

3. Satellite Internet & Low Altitude Economy:

Defense informatization construction is being accelerated, low-orbit satellites are being actively developed, and the low-altitude economy is being actively promoted. Key recommendations are: Huazue Navigation (joint computer coverage), Haige Communications; recommended focus on: Chengchang Technology, Zhenlei Technology, Shenglu Communications, Xinke Mobile, Shanghai Hanxun, Guobo Electronics, Zhenyou Technology, Jiayuan Technology, Mengsheng Electronics, China Satellite Communications, China Satellite Communications, Electronics Network Security, Hytera, etc.

Risk warning: The decline in operators' capital expenditure exceeds expectations, the impact of the global pandemic exceeds expectations, industry competition intensifies, the impact of raw material shortages and price increases exceeds expectations, the risk of exchange rate fluctuations, and the risk that a small number of samples selected may cause deviations in statistical results.