Group 1 - Quantum mechanics is one of the most significant scientific discoveries since the 20th century, leading to the first quantum revolution with major technological breakthroughs such as lasers, transistors, and nuclear magnetic resonance, fundamentally changing daily life [1] - The second wave of the quantum revolution is emerging in the 21st century, giving rise to new technologies like quantum computing, quantum communication, and quantum measurement, which will greatly enhance human capabilities in information acquisition, transmission, and processing [1] - China has formed a regional collaborative development pattern in the quantum computing industry, leveraging research advantages, policy support, and industrial foundations to build a differentiated quantum computing ecosystem [1] Group 2 - China is now the third country in the world capable of delivering complete quantum computers, positioning itself in the first tier of the global quantum computing race [2] - The domestically developed third-generation superconducting quantum computer "Benyuan Wukong" features a 72-qubit superconducting quantum chip "Wukong Chip," capable of executing up to 200 quantum circuit tasks simultaneously, making it the most advanced programmable superconducting quantum computer delivered in the country [2] - The research team behind "Benyuan Wukong" has independently developed key components including quantum chips, measurement and control systems, environmental support systems, and operating systems, establishing China's first superconducting quantum computer manufacturing chain [2]

Investment Rating - The report maintains a "Buy" rating for the company [6][4] Core Views - The company achieved a revenue of RMB 134.51 billion in Q1 2025, a slight increase of 0.01% year-on-year, and a net profit of RMB 8.864 billion, up 3.11% year-on-year, which is slightly below the previous expectation of RMB 9.2 billion [1] - The company is well-positioned to benefit from the growth in digital infrastructure and AI applications, with a strong focus on new productivity areas such as AI, quantum computing, and satellite communications [2][3] Summary by Sections Financial Performance - In Q1 2025, the company reported a revenue of RMB 134.51 billion, with a year-on-year growth of 0.01% and a net profit of RMB 8.864 billion, reflecting a growth of 3.11% [1] - The company's mobile user base reached 429 million, with a net increase of 4.95 million, and the penetration rate of 5G users rose to 62% [2] - The company’s gross margin and net margin improved by 0.06 and 0.14 percentage points year-on-year to 29.47% and 6.56%, respectively [3] Growth Drivers - The company is actively expanding its digitalization efforts, with intelligent revenue growing by 151.6% year-on-year and IDC revenue increasing by 10.4% to RMB 9.5 billion [2] - New productivity areas such as satellite communication and quantum computing saw revenue growth of 37.2% and 81.1% year-on-year, respectively [2] Profitability Forecast - The report maintains profit forecasts, expecting net profits of RMB 35.458 billion, RMB 37.751 billion, and RMB 39.904 billion for 2025, 2026, and 2027, respectively [4][12] - The projected revenue for 2025 is RMB 548.495 billion, with a growth rate of 4.76% [5] Valuation - The target price for the A-share is set at RMB 9.13, based on a 1.8x PB valuation for 2025, while the H-share target price is set at HKD 6.61, based on a 1.23x PB valuation [4][13]

Industry Overview - The Chinese optical communication system industry is experiencing market scale expansion, accelerated technological iteration, diversified competitive landscape, and strengthened policy support, showing steady overall development [1][13] - The market size of the optical communication system industry in China is projected to reach 215.4 billion yuan in 2024, with a year-on-year growth of 1.07% [1][13] - Technological advancements are moving towards ultra-high speed, large capacity, and low latency, with 400G optical networks already in commercial use and 800G/1.6T optical modules gradually being deployed [1][13] Technological Developments - Innovations such as silicon photonics and co-packaged optics (CPO) are driving power consumption reductions of over 50% [1][13] - The integration of quantum communication with optical communication provides new pathways for secure information transmission, while integrated optical technologies enhance device intelligence [1][13] Policy and Market Drivers - National policies such as "Broadband China" and "Three Networks Integration" are significantly promoting industry growth [1][13] - Emerging applications in computing networks and smart cities are expanding the boundaries of application, with AI model training driving the demand for upgraded computing infrastructure, further boosting the optical communication system market [1][13] Industry Development History - The optical communication system industry in China has undergone four main stages: early exploration (1970s), technological breakthroughs (1980s), rapid development and industrialization (1990s), and technological upgrades and globalization (2000s to present) [6][7] Industry Chain - The upstream of the optical communication system industry includes core components and basic materials, while the midstream involves R&D and production, and the downstream applications span telecommunications, data communications, consumer electronics, and more [9] Key Companies - Major players in the optical communication system industry include Huawei, ZTE, and FiberHome, which dominate the core markets of optical transmission and access equipment [15] - Companies like Zhongji Xuchuang and Xinyi Technology are gaining traction in the optical module and device segments through technological innovation and differentiated products [15] Market Trends - Technological innovation is the core driving force for the development of the optical communication system industry, with a focus on high speed, high integration, and low power consumption [21] - New application scenarios are expanding, including IoT and smart city initiatives, which will further increase the demand for optical communication devices [22][23] - International competition is intensifying, with Chinese optical communication companies needing to enhance their competitiveness in the global market [24]

Investment Rating - The report maintains a "Buy-A" rating for China Telecom (601728.SH) [2] Core Views - The company achieved a revenue of 523.57 billion yuan in 2024, a year-on-year increase of 3.1%, with service revenue at 482.03 billion yuan, up 3.7% [4] - The company is focusing on expanding its capabilities in emerging fields, particularly in AI and quantum technologies, which are expected to drive future growth [5][10] Summary by Sections Market Performance - As of April 11, 2025, the closing price was 7.93 yuan, with a total market capitalization of 615.60 billion yuan [3] Financial Performance - In 2024, the company reported an EBITDA of 140.85 billion yuan, a 2.9% increase year-on-year, and a net profit attributable to shareholders of 33.01 billion yuan, up 8.4% [4] - The earnings per share (EPS) for 2024 was 0.36 yuan, reflecting an 8.4% increase [4] Business Segments - Mobile communication service revenue reached 202.5 billion yuan, a 3.5% increase, with mobile value-added services growing by 16.1% [5] - Fixed-line and smart home service revenue was 125.7 billion yuan, up 2.1%, with smart home business revenue increasing by 16.8% [6] - The digital industry revenue reached 146.6 billion yuan, a 5.5% increase, with Tianyi Cloud revenue at 113.9 billion yuan, up 17.1% [8] Investment and Future Outlook - The company plans to invest 93.5 billion yuan in capital expenditures for 2024, a decrease of 5.4%, while maintaining a focus on computing power investments, which are expected to increase by 22% [10] - The company aims for steady growth in revenue, EBITDA, and net profit through 2025, with a projected net profit of 34.56 billion yuan [11]

Investment Rating - The industry investment rating is "Positive" and maintained [5] Core Viewpoints - The successful development of the "Zu Chongzhi No. 3" prototype, which features 105 qubits (including 105 readable qubits and 182 coupled qubits), marks a significant breakthrough in quantum computing, achieving a speed 15 orders of magnitude faster than the current strongest supercomputers for random circuit sampling tasks [3][4] - China is expected to continue releasing quantum computing achievements, solidifying its leading position in the field, with ongoing research into surface code quantum error correction algorithms [4][8] - Major international tech companies are entering the quantum computing space, indicating that quantum computing may become a key focus area in the technology industry [4][8] Summary by Sections Event Description - On March 3, the University of Science and Technology of China announced the successful construction of the "Zu Chongzhi No. 3" superconducting quantum computing prototype, which can solve quantum random circuit sampling tasks rapidly [3][4] Performance Highlights - The "Zu Chongzhi No. 3" prototype has a coherence time of 72 microseconds, with single-qubit gate fidelity at 99.90%, two-qubit gate fidelity at 99.62%, and readout fidelity at 99.13% [4][8] - It surpasses the latest results published in October 2024 by six orders of magnitude, establishing itself as the strongest quantum computing superiority in the superconducting system [4][8] Industry Outlook - The quantum computing sector is expected to accelerate development, with China focusing on quantum error correction, entanglement, simulation, and quantum chemistry, which will drive the entire quantum technology industry chain [4][8] - The report suggests paying attention to the entire quantum technology industry chain, particularly leading companies in quantum computing and quantum communication [4][8]

Core Viewpoint - The article highlights significant innovations and advancements in the field of photonic integrated chips by the Xi'an Institute of Optics and Precision Mechanics, Chinese Academy of Sciences, particularly in 2024, showcasing their contributions to basic research and technology development in quantum communication and optical interconnects [1][2]. Group 1: Photonic Integrated Chips - The Xi'an Institute of Optics and Precision Mechanics has made notable progress in the field of integrated optical frequency combs, collaborating with teams from the University of Science and Technology of China and the National University of Defense Technology to achieve a "fully identical" microcavity soliton optical frequency comb with 50 channels meeting the ITU frequency spacing standard of 50GHz, laying the groundwork for scalable quantum communication systems [2]. - The research results were published in *Science Advances* and were featured as a highlight of the issue [3]. Group 2: Silicon-based Optical Interconnects - The research team successfully developed the world's first single-port silicon-based optical interconnect chip with a rate of 2Tbps and a bandwidth density of 4Tbps/mm, marking a significant enhancement in interconnect capabilities and providing a domestic solution for applications in artificial intelligence, high-performance computing, and data centers [5]. - This chip integrates high-performance micro-ring modulators and avalanche photodetectors, overcoming common challenges of high bandwidth, low power consumption, and high reliability [7]. - The development process involved a complete technical chain from theoretical modeling to chip integration, significantly improving device performance and enabling effective support for enhanced computing power in AI applications [7]. Group 3: Metasurface Chips - A generalized theory for polarization optical phase control of metasurfaces was proposed, expanding the theoretical boundaries of polarization control and leading to the development of a quantum state tomography polarization multiplexing metasurface chip [8]. - The research team collaborated with Nanjing University to create a framework that allows independent control of arbitrary polarization states across multiple channels, opening new avenues for multifunctional photonic device development [8]. - Additionally, a metasurface capable of generalized measurement of quantum states was designed, which simplifies the experimental complexity of multi-photon entanglement measurement and enhances the efficiency of quantum state reconstruction [11].