The investment logic of the market will be based on the emotional recovery and the upward revision of expectations, combined with the fundamental recovery. The communication sector has solid underlying performance and macro narratives of growth attributes, and is expected to continue to be a preferred allocation with excess returns.
According to the Intelligent Finance APP, Huachuang Securities released a research report stating that looking ahead to 2025, the market's investment logic will be based on emotional recovery and the upward revision of expectations, further combined with the fundamental recovery. The communication sector has solid underlying performance and macro narratives of growth attributes, and is expected to remain a preferred allocation with excess returns. It is recommended to focus on computing power, satellite communication/military communication, and the three major directions of operators. The computing power direction is expected to benefit from equipment and infrastructure investments landing on one hand, and more evolution directions and investment opportunities brought by the higher speed, longer distance, and higher density AI computing power connection demand on the other hand; Satellite communication/military communication is expected to show an upward turning point in the fundamentals in the near future with sufficient upward momentum; The investment logic of high dividend dividends of operators is clear and may contribute to stable returns as a core allocation.
Huachuang Securities' main views are as follows:
Grasp the main line of AI computing power and explore investment opportunities in segmented sectors.
Computing power as a high certainty growth investment direction in 2025, the bank's core recommendation lies in four segmented sectors within the main line of computing power investment opportunities:
1) AI drives the demand for computing power construction, cloud providers continue to increase investment in AI computing power, global W cards, 100,000 cards clusters continue to emerge, and it is expected that capital expenditure will continue to rise in 2025. Key recommendations include Suzhou TFC Optical Communication (300394.SZ), Zhongji Innolight (300308.SZ), Eoptolink Technology Inc., (300502.SZ), with a suggestion to pay attention to Accelink Technologies (002281.SZ), CNI Data Factor Index (688498.SH), etc.
2) Silicon photonics and CPO technology routes have relatively high certainty. Currently, domestic enterprises are leading in silicon photonics chips, while in the CPO industry chain segment, overseas manufacturers dominate. The bank believes that domestic manufacturers in the CPO industry have hopes of breakthroughs in optical engines, laser light sources, optical routing, and the final assembly segment. Key recommendations include Suzhou TFC Optical Communication, Zhongji Innolight, with a suggestion to focus on CNI Data Factor Index, T&S Communications (300570.SZ), Unisplendour Corporation (000938.SZ), Ruicheng Networks (301165.SZ).
3) The trend of the IDC industry climate index has improved, and the iteration of artificial intelligence technology has injected new momentum into the development of the IDC industry, contributing to new growth in the industry. Key recommendations include Range Intelligent Computing Technology Group (300442.SZ), recommended focus on Guangdong Aofei Data Technology (300738.SZ), Beijing Sinnet Technology (300383.SZ), Shanghai Athub (603881.SH), Capital Online Data Service (300846.SZ).
4) The rapid expansion of global data center scale and the increasing demand for AI have led to a rapid increase in DCI interconnection demand. It is expected that the market size of DCI will grow rapidly in the next few years. The emergence of DCI demand is expected to directly drive the growth of upstream subsystems and related optical module device demand. The industry recommends focusing on Digitron (688205.SH), Accelink Technologies (002281.SZ).
In the satellite application field, beta is approaching, and the construction of national defense informationization is accelerating.
1) In terms of low-orbit satellites: G60 has completed two launches and networked in the form of 'one launch with 18 satellites,' and the number of high-orbit satellites in orbit has increased to three. From the perspective of the industry chain, both satellite manufacturing capabilities and launch site construction progress have made rapid progress, and there are also many new types of terminal products emerging on the terminal side. In terms of participants, China Mobile Research Institute announced the establishment of the Satellite-Ground Fusion Technology Research Institute, and China Mobile also jointly established China Spatial Information Group with China Satellite Network and China Ordnance to consolidate its leading position in the satellite communication field. China's low-orbit satellites are expected to enter a period of intensive launches, and the industry beta is approaching. Recommended to focus on Jushri Technologies, Inc. (300762.SZ), Cheng-Chang Technology (001270.SZ). Recommended to focus on Guangzhou Haige Communications Group Incorporated (002465.SZ), Shenzhen Yue Mobile-U (688387.SH), Genew Technologies (688418.SH).
2) In terms of satellite navigation: The security significance of the transition from Beidou multi-mode to single-mode guaranteeing communication signal switching is further highlighted. In the Beidou application, short messages and high-precision positioning both have high expectations for implementation, with broad market prospects, and companies in the industry chain are expected to benefit corely. Recommended focus on Guangzhou Haige Communications Group Incorporated, Shanghai Huace Navigation Technology (300627.SZ).
3) In the military-industrial communication sector: With the current international security situation becoming increasingly tense, and the world political situation in turmoil, China's defense expenditure budget is steadily increasing. Military wireless communication and military radar are both in a stage of technological upgrading and market space expansion, with the industry chain potentially offering many investment opportunities. Key recommendations include Shanghai Jushri Technologies, Inc., Cheng-Chang Technology, Tianjin 712 Communication & Broadcasting (603712.SH), recommended focus on Guangzhou Haige Communications Group Incorporated, etc.
Carrier high dividend investment logic is clear, contributing stable returns as a basic position.
On one hand, after years of investment and construction, carriers have built large-scale networks for 5G and gigabit broadband. With the increase in 5G penetration rate, gigabit optical network penetration rate, and the development of cloud computing, computing resources, cni data factor index, AI, and other government and enterprise businesses, carriers' overall revenue and profits are expected to remain stable. On the other hand, the three major carriers have maintained a high dividend level over the years, with China Mobile/China Telecom/China Unicom's dividend payout ratios reaching 71%/70%/55% in 2023 respectively, and the promised dividend payout ratio is expected to further increase. They are high-quality high-dividend dividend assets that can be considered as basic portfolio allocations. Key recommendations include China Mobile (00941, 600941.SH), China Telecom (00728, 601728.SH), China Unicom (00762, 600050.SH).
Risk Warning: Macroeconomic development falls short of expectations, downstream demand recovery or growth falls short of expectations, ai development and computing power enhancement falls short of expectations, dci demand falls short of expectations, satellite communication demand falls short of expectations, risk of operator arpu decline, global systemic risk.
