Shanghai Securities·2024-11-22 02:09Investment Rating - The report assigns a "Buy" rating for the company, marking the first coverage [7]. Core Insights - The company has a solid foundation in connectivity and is accelerating its expansion into computing power business. It offers a complete end-to-end solution in the ICT industry, covering areas such as high-speed networks, computing infrastructure, digital energy, and terminals. As of 2023, the company's global market share reached 13.9%, ranking fourth in the world and second in China [6][19][21]. - The company has established a second growth curve strategy, actively expanding into server, data center, switch, and 5G application products. In the first half of 2024, revenue from government and enterprise services and consumer business grew by 56.09% and 14.28% year-on-year, respectively [6][7][19]. - The transition to 5G-A equipment presents new growth opportunities, with the company poised to leverage its traditional network advantages and capture structural opportunities in connectivity [6][7][19]. Summary by Sections 1. Company Overview - The company is a global leader in integrated communication and information technology solutions, operating in over 160 countries and regions. Its products span high-speed networks, computing infrastructure, digital energy, and terminals, focusing on empowering various industries [19]. 2. 5G-A Equipment Replacement and Market Dynamics - The company maintains a strong position in traditional networks, with a stable domestic market share. It has made significant breakthroughs in international markets, including key projects in countries like Cameroon and Côte d'Ivoire [26][28]. - The 5G-A standard has been frozen, marking the beginning of its commercialization. The deployment of 5G-A will require high-performance equipment upgrades, creating additional market space [29][30]. 3. Demand for Computing Power - The construction of intelligent computing centers is accelerating in China, with over 250 centers established or under construction by mid-2024. The demand for computing power is experiencing explosive growth [51]. - The company is well-positioned to benefit from increased capital expenditure by operators in computing power, with significant investments planned for 2024 [51][54]. 4. Financial Analysis - The company's revenue and net profit have shown steady growth, with a compound annual growth rate of 8.18% and 16.01% from 2019 to 2023, respectively. In the first half of 2024, revenue increased by 2.94% year-on-year, despite a decline in operator business revenue [79][84]. - The company has improved its expense ratio, with a decrease in the period expense ratio to 30.72% in the first half of 2024, contributing to a net profit margin of 9.14%, the highest in five years [84].