Group 1 - The core viewpoint is that since 2021, the domestic 10-year government bond yield has been on a downward trend, entering a low-interest-rate era, with yields falling below the long-term range of 2.8% to 4.5% [1] - The ability of valuation to rise during a declining interest rate phase depends on the state of the fundamentals; if the economy stabilizes but does not significantly recover, valuations may increase, while in a deflationary environment, valuations may continue to decline despite a loose monetary environment [1] - Currently, the A-share market's 6% to 7% ROE level corresponds to a reasonable 2x PB, but there is significant industry differentiation; economic cycle assets have reasonable valuations but limited ROE recovery, while stable assets have room for improvement in a declining interest rate environment [1] Group 2 - The 10-year government bond ETF (511260) employs an optimized sampling replication strategy to closely track the Shanghai Stock Exchange 10-year government bond index, with an average duration of 7.6 years [1] - The ETF publishes a daily PCF list, ensuring transparency in holdings, making it suitable for medium to long-term investors seeking stable returns as a core allocation [1] - Growth assets are more transaction-oriented, with a focus on positive mid-term expectations in areas such as overseas AI computing power chains, exports to Europe, and price increase chains [1]

Investment Rating - The report maintains an "Overweight" rating for the communication industry and its sub-sectors, including communication operators [9]. Core Insights - China Mobile has initiated a centralized procurement project for ordinary optical cable products for 2025-2026, with a notable decrease in both procurement scale and price limits, indicating a downward trend in capital expenditure for traditional connections [2][3]. - The optical fiber and cable manufacturers are expected to seek new growth points in saturated markets, such as undersea cables and data center interconnect (DCI) [2][3]. - The report highlights the need to monitor the bidding progress of optical fiber and cable manufacturers and their breakthroughs in new directions [2][3]. Summary by Sections Market Overview - The communication index rose by 4.96% last week, outperforming the Shanghai Composite Index and Shenzhen Component Index, which increased by 1.92% and 2.29%, respectively [2][13]. - The procurement scale for China Mobile's current round is 0.99 billion core kilometers, down 30.98% from 2021 and 8.65% from 2023 [14]. Procurement Details - The maximum price limit for this round is set at 5.675 billion yuan, a decrease of 42.44% from 2021 and 25.57% from 2023 [14]. - The average procurement price is 57.42 yuan per core kilometer, down 16.6% from 2021 and 18.72% from 2023 [14]. Company Recommendations - The report recommends several companies for investment, including China Mobile, China Telecom, and China Unicom, with target prices and ratings indicating a bullish outlook [10]. - Specific companies highlighted for their potential include Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication, all rated as "Buy" [10]. Industry Trends - The report notes a significant shift in focus towards AI computing chains and core asset value reassessment within the communication industry [4]. - The demand for optical cables in data centers is projected to account for approximately 5% of global demand by 2025, increasing to over 11% by 2030 [18]. Competitive Landscape - The competitive environment among optical cable manufacturers is expected to intensify due to the reduced procurement scale and price limits, with a maximum share of 19.36% for winning bidders [15][18]. - Major players are expanding into international undersea communication projects, with companies like Hengtong Optic-Electric actively participating in global markets [19].

Core Viewpoint - The company shows strong revenue growth in 2024 but reports a net loss, while the first quarter of 2025 indicates a recovery with positive net profit, highlighting potential in the AI era [1][2]. Financial Performance - In 2024, the company's revenue reached 252 million, a year-on-year increase of 74.63%, while the net profit attributable to shareholders was -6 million, a decrease of 131.49% [1]. - For Q1 2025, revenue was 84 million, reflecting a year-on-year growth of 40.52%, and the net profit attributable to shareholders was 14 million, up 35.93% year-on-year, indicating a return to profitability [1]. - The overall gross margin for 2024 was 33%, down 9 percentage points, primarily due to intensified competition in the telecom market; however, Q1 2025 saw a gross margin of 45%, up 10 percentage points, attributed to an increase in data center business revenue [2]. Business Segments - The telecom market segment generated 202 million in revenue for 2024, a 52% increase, driven by the recovery in downstream market demand such as fiber access [1]. - The data center and other business segments reported revenue of 48 million, a staggering increase of 919%, due to successful expansion and mass production of CW silicon photonic products [1]. Cost Management - The company maintained good cost control, with sales, management, and R&D expense ratios for 2024 at 7.35%, 10.32%, and 21.62%, respectively, showing a mixed trend with sales and management expenses increasing while R&D expenses slightly decreased [2]. Market Position and Future Outlook - As a leading domestic manufacturer of optical chips, the company is expected to benefit from the ongoing growth in AI computing power, with demand for high-speed optical modules likely to continue rising [2]. - The company anticipates further growth in revenue and gross margin as the output of CW light sources for high-speed silicon optical modules increases, with new high-end optical chip products expected to contribute to future performance [2]. Rating and Valuation - The company maintains a "buy" rating despite adjusting the net profit forecasts for 2025-2026 due to increased competition in the telecom market, with new estimates of 107 million, 179 million, and 265 million for 2025, 2026, and 2027, respectively [3]. - The target price is set at 136.32, based on a 110 times PE ratio for 2025, reflecting the company's leading position in high-end optical communication chips [3].

Investment Rating - The report maintains an "Overweight" rating for the communication sector and its sub-sectors, including telecommunications operators and data centers [9]. Core Insights - The communication sector's fund holdings decreased to 2.32% in Q1 2025, down 1.06 percentage points from the previous quarter, indicating a shift from overweight to underweight status [2][3]. - The report highlights a positive outlook for telecommunications operators, AI computing chains, and new productivity sectors such as commercial aerospace, low-altitude economy, and deep-sea technology [2][3]. - The TTM P/E ratio for the communication sector as of April 25, 2025, is 29.33x, which is at the 5.90% historical percentile since early 2011 [3][14]. Summary by Sections Market Overview - The communication index rose by 1.32% last week, outperforming the Shanghai Composite Index (0.56%) and the Shenzhen Component Index (1.38%) [2][13]. - Public funds have increased their holdings in data centers, operators, and offshore wind sectors while reducing positions in optical modules and wireless devices [3][14]. Key Companies and Dynamics - Recommended companies include ZTE Corporation, Zhongji Xuchuang, Xinyi Technology, Tianfu Communication, Taicheng Light, and WanGuo Data for AI computing chains [4]. - Core asset value reassessment is suggested for China Mobile, China Telecom, and China Unicom, while Les Information is highlighted for new productivity sectors [4]. Fund Holdings and Changes - The top five companies in terms of fund holdings in Q1 2025 are Xinyi Technology, Zhongji Xuchuang, China Mobile, ZTE Corporation, and China Telecom, with total market values of 120.33 billion, 103.64 billion, 73.51 billion, 49.16 billion, and 36.46 billion respectively [25][26]. - The report notes significant increases in holdings for companies like Aofei Data and Runze Technology, with respective increases of 11.89 billion and 10.94 billion in market value [24]. Sector Trends - The report emphasizes the ongoing development of 5G technology and its applications, including the successful demonstration of 5G NR broadcasting in Hainan [28]. - The establishment of high-speed data centers, such as the China Mobile Yangtze River Delta data center, is noted as a significant investment in infrastructure [35].