The blueprint for new infrastructure investment is slowly unfolding: How important is 5G in 2021?
Our reporter Zhao Ziqiang Zhang Ying Wu Shan
Trainee reporter Ren Xiaoyu Chu Lijun
From the central to the local, the new infrastructure boom is spreading across the board.
The State Council Office of the Central Committee of the People’s Republic of China issued the "Action Plan for Building a High-Standard Market System" recently, proposing to strengthen market infrastructure construction and increase investment in new infrastructure.
The successive local two sessions have once again released new signals to accelerate the development of new infrastructure.
Although the "new infrastructure" was once ignored by the A-share market due to traffic stars such as Moutai and Tesla, the policy refers to the direction of development. The new infrastructure has both high growth and high certainty, and the long-term investment value is self-evident. Metaphor.
As the biggest driving force for new infrastructure, 5G will be launched frequently in 2021, and financial funds and social capital have all chosen to compete in this field.
Policy warm air blows frequently
5G has become a hot word in the investment world
In recent years, with the continuous benefits of 5G policies and continuous breakthroughs in industry technology, the development potential of the 5G industry has also attracted the attention of the capital market and has become a high-frequency word that continues to emerge in the investment community. The value it represents is constantly being verification.
From a policy perspective, recently, the "Action Plan for Building a High Standard Market System" issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council has further raised the height of 5G in the minds of investors.
The plan instructs to increase investment in new infrastructure, promote fifth-generation mobile communication, Internet of Things, industrial Internet and other communication network infrastructure, artificial intelligence, cloud computing, blockchain and other new technology infrastructure, data center, intelligent computing Construction of computing power infrastructure such as centers.
Among them, the investment in 5G infrastructure is placed first, showing its unique position.
A few days ago, the State Information Office held a press conference on the development of industry and information technology in 2020.
“In 2020, my country’s newly built 5G base stations will exceed 600,000, realizing full coverage of 5G networks in all prefecture-level and above cities; the number of 5G terminal connections will exceed 200 million, and the digitalization of multiple industries will continue to deepen; there will be more than 1,100 '5G+Industrial Internet' projects. '5G+Remote Consultation' is available online in more than 60 hospitals in 19 provinces." Zhao Zhiguo, spokesperson of the Ministry of Industry and Information Technology and Director of the Information and Communication Administration Bureau, introduced the development of 5G commercial use in 2020.
The data on the commercial development of 5G in 2020 shows that the 5G industry has achieved rapid development in 2020. Regarding the development prospects of the 5G industry in 2021, the Radio Management Research Institute of China Electronics Information Industry Development Research Institute issued the "2021 5G Development Outlook White Paper" .
The white paper pointed out that in 2021, my country's 5G network construction and industrial scale will further increase, and the increase will exceed 2020.
The four major operators will continue to deploy 5G-scale networking, and jointly explore 5G integrated applications.
5G converged applications will benefit C/B/G multi-terminal users and the market, among which 5G private network construction in the industrial Internet field will take the lead.
In the face of continued favorable news from the policy side, market analysts have expressed positive optimism about the development of the 5G industry.
Liu Wenting, a researcher of private equity ranking network, told a reporter from the Securities Daily that the recent 5G strategic cooperation signed by Radio and Television and China Mobile has reduced the cost of 5G network deployment, which has played a positive role in promoting the development of the industry, which means that the large-scale construction of 5G network is officially stepped. On the agenda, it is reported that the 700MHz frequency band is a golden frequency band recognized by the industry and can be used for wide-area coverage, which greatly compensates for the problem of insufficient coverage, greatly improves the coverage of 5G networks, and helps promote the application and popularization of 5G networks.
Tong Diyi, general manager of Longying Fortune Assets, who was interviewed by a reporter from "Securities Daily", believes that on January 29, the Ministry of Industry and Information Technology announced the 5G news platform, that is, the procurement of RCS construction projects.
From the perspective of industry development, this will accelerate 5G network coverage and promote 5G downstream development. A major commercial application of 5G has finally landed. The landing of RCS is a relatively definite increase in 5G construction investment in 2021, which will accelerate the overall construction of 5G.
At the same time, the A-share market has continued to usher in 5G concept stocks in recent years. According to statistics from Flushing, a reporter from the Securities Daily found that there were 8 concept stocks listed on the A-share market in 2019, and 11 concept stocks were listed in 2020. Entering 2021, as of February 5, two concept stocks have been listed on the A-share market for the first time, namely China Ceramics Electronics and China Britain Technology.
Overall, as of February 5, the number of constituent stocks in the 5G concept sector has reached 261.
Regarding the future development opportunities of 5G, Fangxin Wealth Investment Fund Manager Hao Xinming told the "Securities Daily" reporter that after the valuation is extremely compressed, it is expected to usher in the valuation restoration market. In the industry segment, optical modules and IDC will benefit from cloud computing. Big.
In an interview with "Securities Daily" reporter Wang Xuan, Chairman of Chengen Capital, said that my country's 5G services will evolve from "available" to "easy to use", and incremental services in the 5G low-frequency market are still being deployed.
China Radio and Television's participation in the construction as the fourth largest operator will bring new order increments.
According to historical experience, in the first quarter of each year, operators will start a new year of equipment purchases, so the performance of communications companies will usher in marginal improvement.
Beijing Capital Securities stated that the centralized procurement project has finally landed, and the ecosystem has been assured.
It is recommended to pay attention to operators such as China Unicom in the medium and long term.
First, network construction costs are expected to be better controlled; second, network operation and maintenance costs are expected to be better controlled; third, the increase in the number of 5G package users has greatly exceeded the operator’s set goals, driving ARPU improvement; fourth, innovative services It is expected to grow rapidly.
Guojin Securities stated that the 5G era is accelerating, and the world’s major economies are accelerating the commercialization of 5G.
Driven by policy support, technological progress and consumption recovery, 5G mobile phones will achieve rapid volume.
The continual arrival of 5G mobile phone replacement tides will drive the performance improvement of related industry chains such as radio frequency and antennas.
5G concept index rose for two consecutive years
Multiple concept stocks hit a record high
With the development of the 5G industry, the 5G concept sector has also shown good market performance in the past two years.
According to statistics from Flush, a reporter from the Securities Daily found that the 5G concept index ushered in a peak increase in 2019, with an annual increase of 41.80%, which was much higher than that of the Shanghai Composite Index (22.30%). The annual increase in 2020 is 11.89%, which is slightly weaker. During the same period, the Shanghai Stock Exchange Index (up 13.87%).
Looking back at the performance of 5G concept stocks in 2020, among 258 tradable stocks, 121 stocks achieved gains, accounting for nearly 50%. Among them, Bojie shares ranked first with an annual increase of 347.72%, followed by Torch Electronics. After that, it rose by 217.44%, and the four stocks, including Genesis, Hongda Electronics, Philippine, and Aerospace Development, all rose by more than 170% during the period.
Since 2021, the 5G sector has seen a significant decline. As of February 5, the cumulative decline during the period was 15.07%. The market performance was significantly weaker than the Shanghai Composite Index (up 0.67%) during the same period.
Specifically, only 25 stocks achieved gains during the period. Among them, China Ceramics Electronics achieved a cumulative increase of 175.08% during the period, ranking first. *ST Shenger and Kingfa Technology achieved cumulative gains of 71.58% and 52.86% during the period, Sunlord Electronics, Quectel, Yizumi, Heertai and other 4 stocks have gained more than 20% during the period.
Datang Telecom, Bangxun Technology, and ST Shuzhi were among the top decliners, with cumulative declines of 51.60%, 48.14%, and 41.87% respectively during the period.
Regarding the recent continuous decline in the 5G sector, Ma Cheng, general manager of Juze Investment, told the Securities Daily reporter, “We believe there are two main reasons: First, in 2020, China’s newly built 5G base stations will exceed 600,000. By the end of 2020, all More than 718,000 5G base stations have been opened, and full coverage of 5G networks in cities above the prefecture-level nationwide has been achieved. That is to say, since China started the construction of 5G base stations in 2019, the overall construction progress has exceeded expectations, and most areas of the country have already implemented 5G networks Coverage. In 2021, the country will continue to deepen the construction of 5G networks, but the climax of base station construction has passed, and the peak period of performance dividends of related companies has passed; second, the market has been from the beginning of 2019 until 2020, and the entire 5G sector is in themes and performance Under the stimulus, listed companies such as ZTE Corporation, Shanghai Electric Power Co., Ltd., and Shengyi Technology have experienced huge gains. After the peak period of predictable performance in the future, most investors will choose to avoid it. This is the main logic of the recent market downturn."
Further analysis revealed that only a small number of 5G concept stocks have been placed in the market recently. According to statistics from Flush, a reporter from the Securities Daily found that only 12 stocks have shown a net inflow of funds from large singles this year, with a total net inflow of large single funds of 13.48. 100 million yuan.
Among them, China Ceramics Electronics has the largest net inflow of large order funds at 514 million yuan. Sunlord Electronics, Quectel, and Sino-British Technology have all exceeded 100 million yuan in net inflows, respectively 238 million yuan, 217 million yuan, and 1.57 million yuan. 100 million yuan.
Liu Youhua, research director of private equity ranking network, told the "Securities Daily" reporter that the 5G sector has fallen sharply this year. Of course, the market is the primary reason. This year, except for liquor and other consumer stocks, the rest of the stocks have fallen.
Secondly, from the perspective of the 5G sector itself, the demand for 5G construction is actually in progress, but the performance release is relatively slow, which may not be as good as market expectations.
In addition, the outflow of funds from the entire technology sector is relatively obvious, so the 5G sector that is temporarily out of the air has suffered from the outflow of funds from the market.
It is worth mentioning that some stocks have also shown outstanding performance. Their share prices have reached a record high this year. Excluding the two new stocks listed within this year, Zhongying Technology and China Ceramic Electronics, Aerospace Electric, Hongda Electronics, AVIC Optoelectronics, Desai The stock prices of 5 stocks including Battery and Siripul all hit record highs this year.
Regarding the investment opportunities in the 5G sector, Lang Chengcheng, director of the research department of Furong Fund, said in an interview with a reporter from the Securities Daily that with the large-scale construction of 5G base stations, downstream related applications will continue to appear, and the overall technology sector will remain high. The expected growth of the company has a large marginal change on the performance side.
The tendency of funds to give premiums to high-prosperity sectors based on performance growth and long-term space will remain unchanged, and technology will remain our focus.
Liu Youhua said that the leading stocks in the 5G sector already have long-term investment value. Coupled with the introduction of the US economic stimulus policy, loose liquidity is good for technology stocks such as 5G. Therefore, the short-term stock price decline is a good opportunity to re-layout. Choose individual stocks.
51 5G companies
Last year's net profit is expected to double year-on-year
Recently, the 5G industry has once again ushered in policy dividends and has become the focus of attention of all parties.
At the same time, the performance of 5G listed companies has shown steady growth.
"Securities Daily" reporters found that according to Flushing statistics, as of the close of February 5, 167 5G listed companies in Shanghai and Shenzhen have disclosed their 2020 performance forecasts.
Among them, 99 companies are expected to perform well, accounting for nearly 60%.
It is worth noting that there are 51 5G companies whose net profit growth in 2020 is expected to exceed 100% year-on-year. Among them, 4 companies including Guohua Netan, Shijia Photonics, Vibrant Technology, and Bochuang Technology will have net profit in 2020. The year-on-year profit growth is expected to exceed 1000%, which can be described as excellent results.
"Most of the growth in the performance of 5G listed companies is in line with expectations, and at the same time it is relatively certain." Yong Guotie, assistant to the manager of the Rongshu Investment Fund, who was interviewed by a reporter from the Securities Daily, said that the core behind the growth of 5G listed companies is the construction of 5G base stations. The growth of the number, starting from 2019, the number of 5G base stations constructed every year is determined to increase. Therefore, the growth of a considerable part of the company's performance is in line with expectations.
In 2019, the number of 5G base stations to be built in China will be about 130,000. In 2020, the number of 5G base stations will be about 600,000. We expect to reach the level of 800,000 stations in 2021. The peak in 2022 is expected to reach 1 million stations. Starting from 2023, the number of 5G base stations will begin to decline every year.
At the same time, Li Ran, general manager of Ether Investment, told the "Securities Daily" reporter that 5G investment is divided into three stages: infrastructure, terminals, and applications or content.
At present, the 5G infrastructure as the focus of the new infrastructure is already in rapid planning and development, and the expected wave of replacement will also appear in the near future.
Therefore, we are very optimistic about the 5G industry chain in the next three years. After all, this is one of the most technologically competitive industries in my country in the field of science and technology, and there should be a good performance release.
Regarding the investment strategy in the A-share market, Li Ran said that the 5G sector has a particularly large number of targets, and investors need to be rough and precise, not blindly chasing concepts, but to choose industries that have their own R&D patents and production and sales do not rely on imports for investment. .
At the same time, it should be noted that the impact of the price reduction of 5G products on the product's gross profit margin should be considered in the valuation of the comparison of the production capacity reduction cost and the updated gross profit reduction, focusing on the conversion ability of the product market share.
"5G covers a long and broad industry chain. Overall, the internal reasons and logical differences in the performance of 5G listed companies are relatively large, mainly in three aspects." Yang Ziyi, research director of China Ruihe Bank, said in an interview with a reporter from the Securities Daily First of all, the communication base station industry chain actually has a downward trend in 2020 quarter-to-quarter performance, which has also led to the annual decline in the Shenwan Communication Industry Index ranking in the forefront of the market; secondly, in terms of 5G hardware applications, 2020 performance is in line with expectations. This is mainly driven by the mobile phone replacement cycle brought about by the iterative communication cycle; thirdly, 5G software applications are still in the incubation period and are still paying attention.
Yongguo Railway also reminded that although the performance of 5G infrastructure listed companies is increasing, it should be noted that the industry growth rate is gradually declining. In the future, the attention of 5G hard infrastructure companies should be shifted to more space. Larger 5G applications come up.
5G applications are divided into two aspects, C-end applications and B-end applications.
C-end applications mainly refer to smart terminals, including 5G mobile phones, VR/AR devices, Internet of Things devices, etc., and B-end applications include scenarios such as industrial Internet, industrial Internet, and Internet of Vehicles automatic driving through the Internet of Everything.
Regardless of whether the C-side or B-side application, it is necessary to pay attention to how specific business models continue to create value.
"Opportunities and risks coexist, looking for expected low points" Everbright Securities put forward in its research report, Nuggets 5G post-cycle.
In 2020, operators' base station scale bidding + independent networking, base stations, optical modules, wired equipment and other performance are gradually realized, related sectors have experienced 6 large increases.
It is expected that with the advancement of 5G commercialization, there will be opportunities in the post-cycle 5G sector. Combined with the valuation and market expectations of the segmented areas, it is recommended to pay attention to operators with low expectations, 5G private networks, and network visualization.
35 5G companies received institutional research
The sector is expected to reverse in the first quarter
"According to past experience, operators generally start equipment procurement in the first quarter of each year. Projects that were stalled last year are expected to be restarted this year. Together with the acceleration of domestic 5G base station investment and construction in 2021, this will bring an incremental market. Under the constant background, the 5G sector is expected to usher in a reversal in the first quarter. Under the 5G segment, we can focus on related varieties with good fundamentals, strong strength, and performance valuations that need to be revalued." Some analysts said.
5G concept stocks have recently attracted the attention of institutions.
According to statistics from Flush, a reporter from the Securities Daily found that as of February 5 this year, a total of 35 listed companies in the 5G sector have won multiple awards including fund companies, securities companies, overseas institutions, Sunshine Private Equity, insurance companies, QFIIs, etc. Institutional research.
Among them, during the development of Leon Micro and Aerospace, the number of institutions that have received and participated in the survey has exceeded 100, reaching 120 and 110 respectively. Xinwei Communication (91), Dongshan Precision (90), and China Engineering Technology (68) ), Keshun Co., Ltd. (57) and Sunlord Electronics (51) and other 5 companies were also jointly investigated by more than 50 institutions during the period.
Regarding the future market performance of the 5G sector, Zhao Liangbi, a strategic analyst in the open source securities industry, said that the implementation of the China Mobile + China Radio and Television 700M spectrum co-construction and sharing plan has reduced the cost of 5G network deployment, and the incremental layout of 5G low-frequency will accelerate the pain points of 5G terminals and applications The popularity of 5G has enabled my country’s 5G to transform from “usable” to “easy to use”, and the valuation and performance of related companies are expected to rise.
It is foreseeable that large-space 5G applications, expected poor 5G equipment, marginal improvements in communications operators, and 5G sector reversal in the first quarter of 2021 are imminent.
Recently, many institutions are optimistic about the investment opportunities of 5G concept stocks in the market outlook. In the last month, 60 5G concept stocks have been given optimistic ratings such as "buy" or "overweight" by institutions. Among them, 13 concept stocks are optimistic during the period. The number of ratings is 10 or more. Six concept stocks, including ZTE, Zhongke Chuangda, Quectel, Zhongji Innolux, Xinyisheng, and Tianfu Communications, have been recommended by institutions for 15 times or more during the period. Seven concept stocks including Tongtong, North China Innovation, Keshun, Wingtech, UFIDA, Sunlord Electronics, and Heertai were also recommended by 10 or more institutions during the period, and their configuration advantages were prominent.
Regarding the investment opportunities in the 5G sector, Zhu Sheng, a private equity ranking researcher interviewed by a reporter from the Securities Daily, said that on the basis of the upward development trend of the 5G industry, we are optimistic about the investment opportunities of operators and related leading enterprises on the application side.
Specifically, driven by the dual factors of the acceleration of 5G wireless network construction and the increase of 5G penetration rate, the marginal improvement of operators' performance, coupled with the characteristics of low valuations and high dividend rates, is extremely valuable for investment.
With the acceleration of 5G commercialization on the application side, 5G cited scenarios are gradually enriched, and commercial exploration in vertical fields will continue to deepen, especially optimistic about the investment opportunities of leading IoT companies.
Tianfeng Securities also holds a similar view. The agency said that with the gradual implementation of a new round of 5G bidding by operators in the future, the construction of radio and television 5G will bring incremental demand, and the annual report and quarterly report will gradually land in the industry chain.
Looking at the communications industry index in the past 12 years, the probability of a rise in the communications index between the Spring Festival and the two sessions is as high as 92%, and the probability of a rise in the communications index in the first quarter is close to 60%. While fund holdings are at a new low, the performance and catalysts of leading companies in the industry are expected to resonate. Optimistic about investment opportunities in the communications sector in the first quarter of 2021.
Among them, the core opportunities for 5G investment opportunities are 5G networks (main equipment as the core) + 5G applications (cloud computing + video + traffic + Internet of Things).
"2020 is the unfolding stage of 5G network construction. The opportunities for 5G equipment vendors and related component manufacturers are more prominent. Individual stocks with performance exceeding expectations are expected to usher in performance opportunities during the current annual report quarterly report. In terms of cycle and potential, new applications, new business formats and new models supported and driven by 5G are constantly being born and promoted, which may form greater industry and investment opportunities. Currently, we are optimistic about the 5G+ industrial Internet field and the 5G Internet of Vehicles. There are more prominent trend opportunities in the field of autonomous driving." Yuan Huaming, general manager of Huahui Chuangfu Investment, told a reporter from Securities Daily.
In terms of investment allocation, Pacific Securities industry strategist Li Hongtao said that under the impetus of operators, industry chain suppliers and vertical industry B-end manufacturers, the 5G sector is expected to form an outlet in the field of commercial targeted push.
Suggested attention: Monternet Technology, Wutong Holdings, ZTE, etc.
Open source securities recommended attention: 5G main equipment vendors ZTE, IOT/Mobile Telecom, Fibocom, Holtek, video conferencing Yealink Network, Huichang Communication, optical module Xinyisheng, Zhongji Innolux, Optical Xun Technology, etc.