Investment Strategy - The satellite sector is showing a trend of "East rising, West falling," indicating that China may achieve a latecomer advantage in low Earth orbit satellites. The number of Starlink satellites falling has increased significantly, with 316 expected to fall in 2024, compared to only 2 in 2020. This trend correlates with heightened solar activity [12][16] - The "computing satellite" sector is emerging as a new avenue, with China potentially holding a first-mover advantage. The "Star Computing" plan aims to establish a space-based computing network with 2,800 satellites, while the "Three-body Computing Constellation" will achieve a total computing power of 1,000 POPS [13][14] - Four key advantages are expected to establish satellites as a new type of infrastructure: universal connectivity, high-speed communication, large-scale user access, and safety and reliability. Satellite internet can provide access in remote areas, with latency as low as 20-50 milliseconds and peak speeds reaching 500 Mbps [14][15] Industry News - Starlink satellites have been falling at an increasing rate, with over 500 reported to have fallen between 2020 and 2024. This trend provides valuable insights for China's satellite development, helping to avoid similar risks in the future [16][17] - China Mobile has initiated a procurement project for 170,000 data center switches, with Huawei and ZTE among the winning bidders. This reflects ongoing investments in infrastructure to support AI demand [17][18] - China Mobile has successfully launched a trusted data space project for data annotation, which aims to support various sectors including smart vehicles and healthcare, marking a shift towards a more skill-intensive data industry [18][19] - China Post has successfully conducted long-distance cargo transport using fixed-wing drones, marking a significant breakthrough in low-altitude logistics [19] Market Review and Focus - The communication sector saw a slight decline of 0.5% this week, with notable performances in optical modules and low-altitude economy sectors. The satellite internet sector is highlighted as a potential investment opportunity [20][21] - Recommended stocks for next week include companies involved in satellite internet, such as Aerospace Universe and Tianyin Machinery, as well as long-term focus on major telecom operators like China Mobile and China Telecom [24]

Group 1 - The market shows significant divergence regarding the telecommunications industry, with optimism for the computing power sector until 2026, but concerns over AI applications and capital expenditure slowing down [1] - The report suggests that while short-term divergences may persist, there is no evidence to support that concerns will materialize, indicating a need for selective investment in the computing power sector [1] - Telecommunications operators are considered stable and high-quality dividend assets, with a recommendation to focus on H-shares over A-shares due to better dividend yields and valuations [1] Group 2 - The computing power infrastructure sector remains strong, with a positive long-term outlook despite the absence of blockbuster applications, suggesting a focus on high-quality North American companies [2] - Specific companies in the optical module and CPO segments are recommended for investment, including names like NewEase, Zhongji Xuchuang, and Tianfu Communication [2] - Attention is drawn to the military communication, controller, IoT, and submarine cable sectors, which are expected to see marginal changes and growth opportunities due to evolving international dynamics and military needs [3] Group 3 - The military demand is expected to remain rigid as China aims to achieve its military goals by 2027, with potential recovery in military-related industries [3] - Companies involved in smart controllers and IoT modules are actively entering new markets, which may lead to new growth opportunities [3] - The offshore wind power sector is anticipated to recover, with improvements in deep-sea technology providing new development opportunities for submarine cables and marine communication systems [3]

Group 1 - Citi has raised target prices for China's three major telecom operators, favoring China Telecom due to its leading position in AI and cloud services [1] - China Mobile is attractive to income-focused investors due to its high dividend yield, with target price increased from HKD 82.3 to HKD 105.1, maintaining a "Buy" rating [1] - China Telecom's target price has been raised from HKD 5.1 to HKD 7.1, reflecting a 1% increase in profit forecasts for 2025 and 2026, while also introducing a forecast for 2027 [1] - China Unicom's target price has been increased from HKD 6.9 to HKD 11.2, with a 2% increase in profit forecast for 2026, maintaining a "Buy" rating and a projected dividend yield of approximately 5.4% [1]

Core Viewpoint - China Telecom and Zhongdian Hongxin Information Technology have applied for a patent for a method of asset data grading based on quality detection, indicating a focus on improving data management and quality assessment in the telecommunications sector [1][2]. Company Overview - China Telecom, established in 2002 and based in Beijing, primarily engages in telecommunications, broadcasting, and satellite transmission services. The company has a registered capital of approximately 9.15 billion RMB and has invested in 87 enterprises, participated in 5000 bidding projects, and holds 5000 patent records [1]. - Zhongdian Hongxin Information Technology, founded in 2007 and located in Nanjing, focuses on software and information technology services. The company has a registered capital of 110 million RMB, invested in 1 enterprise, participated in 5000 bidding projects, and holds 253 patent records [2]. Patent Details - The patent, titled "A Method of Asset Data Grading Based on Quality Detection," was applied for on January 2025. It involves collecting heterogeneous asset data, configuring quality detection rules, and grading asset data based on a comprehensive score derived from various quality metrics [1].

Core Insights - The rapid development of artificial intelligence has made "computing power" and "data" essential infrastructure for industry growth [1][6] - The Guangdong-Hong Kong-Macao Greater Bay Area is positioning itself as a new hub for data industry development, with Shaoguan as a key player [1][2] Group 1: Infrastructure Development - Shaoguan has established 13 400G optical networks connecting to the Greater Bay Area, significantly enhancing its capacity to support the digital economy [1] - The city has built a high-speed computing power latency circle, with latency times of 1ms for city connections, 3ms for the Greater Bay Area, and 5ms within the province [1] - Major telecom operators have begun launching data centers in Shaoguan, indicating a competitive landscape for computing power investment [2][4] Group 2: Investment and Capacity - The total investment in Shaoguan's computing power cluster by major operators and tech companies has reached 621 billion yuan [2] - China Unicom's data center in Shaoguan has a planned capacity of 48,000 standard cabinets and a total energy consumption of 120MW, with capabilities for large-scale AI model training [2][5] - China Mobile's data center in Shaoguan has a total investment of 56 billion yuan and is expected to support over 1 million P of computing power upon full operation [5][6] Group 3: Strategic Focus and Future Growth - The three major telecom operators have indicated that their investments in computing power will have no upper limit, reflecting a strong commitment to expanding their capabilities [6][9] - China Unicom anticipates a 28% year-on-year increase in computing power investment by 2025, with special budget arrangements for AI infrastructure [10] - The market for computing power leasing in China is projected to reach 260 billion yuan by 2026, growing at over 20% annually [10]

Core Viewpoint - The performance of the CSI 300 Dividend Low Volatility Index shows mixed results among its constituent stocks, with a slight overall decline, while the ETF associated with this index has seen significant inflows and strong long-term performance metrics [1][5]. Group 1: Index Performance - As of June 13, 2025, the CSI 300 Dividend Low Volatility Index decreased by 0.37% [1]. - The ETF associated with this index, CSI 300 Dividend Low Volatility ETF (515300), experienced a turnover of 4.49% during the trading session, with a total transaction value of 268 million yuan [1]. - Over the past month, the average daily transaction value of the ETF was 11.7 million yuan, and its latest scale reached 5.975 billion yuan [1]. Group 2: Stock Performance - Among the constituent stocks, Shanghai Port Group led with a gain of 1.39%, while Shanghai Bank, Industrial Bank, and Jiangsu Bank saw declines [1]. - The top ten weighted stocks in the index accounted for 36.97% of the total index weight, with China Shenhua and Gree Electric Appliances being the most significant contributors [2][4]. Group 3: Dividend and Investment Trends - The upcoming dividend season from May to July is expected to attract more investments into dividend-paying stocks, as the yield on dividend indices reaches new highs [5]. - Regulatory support for increasing insurance funds' market participation is anticipated to enhance the valuation expectations for dividend stocks [5]. - Investors without stock accounts can access investment opportunities through the corresponding CSI 300 Dividend Low Volatility ETF linked funds [5].

Group 1 - The core viewpoint of the articles indicates that the telecommunications sector is experiencing a recovery in business revenue, driven by increasing mobile internet access and supportive government policies [3][4][5] - The DOU (average mobile internet access traffic per user) has shown significant growth, with a year-on-year increase of 14.6% in April 2025, marking the highest monthly growth rate in 2024 [3] - The overall telecommunications industry revenue for January to April 2025 reached 598.5 billion yuan, reflecting a year-on-year growth of 1.0% [3] Group 2 - The telecommunications operators are entering a golden period of value activation, with a projected upward cycle from 2019 to 2028, influenced by policy changes, competitive landscape, capital investment, and corporate governance [4] - The capital expenditure of the three major telecommunications operators has decreased by 10% year-on-year in 2024, with further planned reductions of 9% in 2025, which is expected to improve cash flow and reduce depreciation pressure [5][6] - The dividend yield for the three major operators remains high, ranging from 5% to 6% for H-shares and 3% to 5% for A-shares, indicating strong dividend-paying capacity [6] Group 3 - The telecommunications sector is currently undervalued historically, presenting investment opportunities in high-quality dividend assets and sectors with strong growth potential, such as AI and cloud computing [5][7] - The Telecom 50 ETF (560300) tracks the China Telecom Index, which includes major telecom operators and has shown a significant increase of over 40% in 2024, compared to a 15% increase in the CSI 300 index [1][8] - The top ten weighted stocks in the Telecom 50 ETF account for 77.54% of the index, indicating a concentrated investment in leading telecom companies [9]

Summary of Key Points from Conference Call Industry Overview - The conference call primarily discusses the AI industry, public cloud services, and the renewable energy sector, with a focus on companies like Huoshan Engine, Guoneng Rixin, and Zhongji Xuchuang [2][9][13]. Core Insights and Arguments AI Industry - Huoshan Engine leads the domestic public cloud large model invocation market with a 46.4% market share [2][3]. - Daily invocation of Huoshan Engine's Daobao model increased from 4 trillion tokens in December 2024 to over 16.4 trillion tokens by May 2025, indicating rapid growth [3]. - AI tool token consumption has surged, with programming tools increasing by 8.4 times and general tools by 10 times [2][3]. - Visual understanding models in K12 education have seen a 12-fold increase in token consumption [2][3]. - Daily token consumption for intelligent inspection videos and video retrieval has surpassed 10 billion [4]. Pricing Strategy - Huoshan Engine's Daobao 1.6 pricing strategy varies by input range, significantly reducing costs for enterprises, especially for requests within the 0-32K range, where costs can drop by 63% [5]. Demand for Computing Power - The AI era is driving a shift from BI to multi-modal data processing, increasing demand for computing power [6]. - Domestic computing power is currently in short supply, with potential price increases expected in the second half of the year [21]. - Despite NVIDIA's potential return to the Chinese market, domestic computing power still has significant growth potential [21]. Renewable Energy Sector - The National Development and Reform Commission's green electricity direct supply policy benefits Guoneng Rixin and Langxin, enhancing their competitive edge in renewable energy generation efficiency [9]. - Guoneng Rixin's products and services are expected to help reduce waste in wind and solar energy generation [9]. Optical Module Market - The demand for optical modules is rapidly increasing, with expectations of 15-17 million units of 800G products needed by 2025 and optimistic projections of 25-30 million units by 2026 [13]. - Zhongji Xuchuang is highlighted as a leading player in the optical module market, with significant potential for rebound and sustained growth [13]. International Expansion and Market Dynamics - Companies like Changfei Fiber have improved their performance, with revenue and profit growth returning to levels seen in 2021 and 2022 [15][16]. - The international market is opening new opportunities, with overseas revenue exceeding 30% [16]. - The hollow fiber technology is identified as a key growth driver for Changfei Fiber, with significant investments from major players like Microsoft [17]. Other Important Insights - The AI industry is expected to see a new wave of growth if major models are upgraded in the coming months [6]. - The consumer electronics sector is anticipated to benefit from innovations in foldable screens and wearable devices, with significant sales expected [23][24]. - The electronic sector is currently facing challenges but may see valuation recovery opportunities, particularly in the consumer electronics segment [19]. This summary encapsulates the key points discussed in the conference call, highlighting the trends, opportunities, and challenges within the AI and renewable energy sectors, as well as the performance of specific companies.

Market Overview - The Shanghai Composite Index rose by 0.01% on June 12, with 15 out of the 28 sectors experiencing gains, led by the non-ferrous metals and media sectors, which increased by 1.40% and 1.33% respectively [1] - The telecommunications sector saw an increase of 0.98% [1] - Conversely, the household appliances and coal sectors faced declines of 1.77% and 1.14% respectively [1] Capital Flow Analysis - The net outflow of capital from the two markets reached 10.588 billion yuan, with 9 sectors experiencing net inflows [1] - The pharmaceutical and biological sector led the net inflow with 1.27% increase and a total inflow of 1.101 billion yuan, followed by the banking sector with a 0.30% increase and an inflow of 988 million yuan [1] - The electronics sector had the highest net outflow, totaling 2.225 billion yuan, followed by the automotive sector with a net outflow of 1.625 billion yuan [1] Telecommunications Sector Performance - The telecommunications sector had a net inflow of 671 million yuan, with 70 out of 127 stocks rising, including 2 stocks hitting the daily limit [2] - The top three stocks with the highest net inflow were Zhongji Xuchuang (2.94 billion yuan), Dongxin Pinghe (2.04 billion yuan), and Tianfu Communication (1.79 billion yuan) [2] - The stocks with the highest net outflow included Chutianlong (2.17 billion yuan), Dongtu Technology (1.19 billion yuan), and China Unicom (1.17 billion yuan) [2][3] Telecommunications Sector Capital Inflow and Outflow - **Top Inflow Stocks**: - Zhongji Xuchuang: +7.43%, 7.82% turnover, 294.44 million yuan inflow - Dongxin Pinghe: +10.01%, 14.45% turnover, 203.92 million yuan inflow - Tianfu Communication: +10.05%, 8.16% turnover, 179.23 million yuan inflow [2] - **Top Outflow Stocks**: - Chutianlong: -1.46%, 28.00% turnover, -216.80 million yuan outflow - Dongtu Technology: -2.76%, 7.51% turnover, -118.76 million yuan outflow - China Unicom: -0.75%, 0.71% turnover, -116.93 million yuan outflow [3]

Investment Rating - The report assigns a "Buy" rating for the company [1] Core Views - The company is expected to maintain stable revenue from traditional communication services while achieving significant growth in digital services, with a projected CAGR of 15% from 2020 to 2024 for digital services [5][22] - The company is positioned to benefit from advancements in satellite communication and quantum technology, which are anticipated to drive future growth [5][49] - The company has a strong dividend yield, with a projected cash dividend of 23.8 billion yuan in 2024, representing 72% of net profit attributable to shareholders [5][21] Summary by Sections Market Performance - The company's stock has shown a relative performance against the CSI 300 index, with a decline of 23% from June 2024 to October 2024 [2] Financial Data and Forecasts - The company’s total revenue is projected to grow from 507.84 billion yuan in 2023 to 586.73 billion yuan by 2027, with a net profit increase from 30.45 billion yuan to 40.59 billion yuan over the same period [6] - The company’s PE ratios for 2025-2027 are estimated at 21.02, 19.33, and 18.08, respectively, which are higher than the average PE ratios of comparable companies [5][6] Business Overview - The company’s traditional communication business remains robust, contributing 3,282 billion yuan in revenue by 2024, although its proportion of total revenue is expected to decline from 73% in 2020 to 63% in 2024 [5][22] - Digital services are projected to grow significantly, increasing from 840 billion yuan in 2020 to 1,466 billion yuan in 2024, enhancing the overall revenue mix [5][22] Capital Expenditure - The company’s capital expenditure peaked at 98.8 billion yuan in 2023, with a slight decrease to 93.5 billion yuan in 2024, and is expected to stabilize at 83.6 billion yuan in 2025 [5][29] Future Growth Drivers - The company is actively pursuing advancements in quantum technology and satellite communications, with significant investments in these areas expected to yield high growth potential [5][49] - The launch of 5G-A services is anticipated to create new opportunities in wireless communication, supported by government policies and operational initiatives [50]