Haitong Securities International·2025-10-31 07:03Investment Rating - The communication industry is rated positively with a significant increase in fund holdings, indicating strong investor interest and confidence in growth potential [1][5][31]. Core Insights - The communication sector's fund holdings increased to 7.76% in Q3 2025, up by 3.90 percentage points, ranking it among the top five sectors [1][5][31]. - The sector's overall valuation is above historical averages, with a PE-TTM of 43x, positioned at the 67th percentile, suggesting room for growth despite high expectations [23][31]. - The AI industry chain remains a focal point, with key companies like ZhongJi InnoLight, Eoptolink Technology, and Suzhou Tfc Optical Communication leading in fund holdings [22][32]. Summary by Sections Fund Holdings Overview - In Q3 2025, the communication sector's fund holdings accounted for 7.76%, ranking fourth among 31 primary industries, with notable increases in holdings for electronic and power equipment sectors [1][5][31]. - The top three companies in fund holdings within the communication sector are ZhongJi InnoLight (RMB 1114.46 billion, +62.53%), Eoptolink Technology (RMB 1101.72 billion, +60.81%), and Suzhou Tfc Optical Communication (RMB 145.44 billion, +14.90%) [13][22][32]. Investment Recommendations - Key investment targets include: 1. Optical modules: ZhongJi InnoLight, Eoptolink Technology, and others 2. CPO/Silicon Photonics: Suzhou Tfc Optical Communication and others 3. PCB: Wus Printed Circuit and others 4. Terminal: ZTE 5. IDC/Liquid Cooling: Wangsu Science & Technology and others 6. Network: ZTE, Ruijie Networks, and others 7. High-speed Copper Cable: Zhaolong Interconnect 8. Operators: China Mobile, China Telecom, China Unicom 9. Military Communication: Guangzhou Haige Communications and others 10. U.S. stocks: Credo, MaxLinear, and others [22][30]. Valuation and Growth Potential - The communication sector's valuation is above historical averages, with expectations of sustained growth driven by AI infrastructure and new connectivity developments [23][31]. - The sector is expected to gradually absorb its valuation while maintaining significant growth potential [23][31].