Strategic Communication (603602) Investment Value Analysis Report: Emerging players in building base station power for well-known manufacturers

Strategic Communication (603602) Investment Value Analysis Report: Emerging players in building base station power for well-known manufacturers
Core point of view The company cuts into the base station’s step power recovery from the communication network construction and maintenance, benefiting from the network construction and improvement in the 5G era, and the growth space is significantly expanded.The company’s EPS for 2019/2020/2021 is predicted to be 0.54/0.64/0.80 yuan, using the segment assessment method, given the traditional business / emerging business target 2019 PE40 / 60 times, corresponding to the target price of 25.8 yuan, the first coverage given a “buy” rating.   Company profile: from construction and maintenance to base station power.The company is a well-known domestic communication network construction and maintenance service provider. It has a clear equity structure, stable core team, continuous optimization of governance structure, and effective 深圳SPA会所 cost control since its establishment for more than ten years.In the 4G cycle, the company’s revenue has steadily increased, but its gross profit margin has continued to decline, and it has now reached a relatively low level of performance.In January 2019, the company set up a joint venture to control the subsidiary, cut into the field of base station power, and cut into the major customers of China Tower. The end of June has contributed nearly 100 million revenues, driving 2019H1 revenues to exceed 43%.7%.   Traditional business: 5G network construction cycle drives performance improvement.Revenue: Operators ‘capital expenditures have picked up in the short term, 5G construction has continued to accelerate, and 5G capital expenditures have exceeded trillions in the long term, with huge demand for base station / room construction.Hangzhou, where the company is located, is committed to building the “5G First City”. The company has accumulated first-mover advantages accumulated over the years. At the same time, it has actively expanded its business area, deepened large-scale stadium and room sub-projects, and continued to increase its revenue space.Gross margin: The company increased R & D pre-layout 5G, and the network construction directly benefited the network construction business sector, driving the improvement of comprehensive gross profit margin. At the same time, the upgrading of communications network technology and the improvement of the gross profit margin under the industry consolidation trend.   Emerging business: The space for the use of base station ladder power is wide.The company’s subsidiary established in 2019 launches the step-by-step battery recycling business, and the demand mainly provides 5G capacity expansion / stock replacement and energy business driving for China Tower base station power: expansion, replacement of 4G, more 5G base stations, single station equipment physical consumption, drivingThe demand for the substrate power supply market continued to increase; in response to the expansion, China Tower responded to the policy call to expand and promote the recycling of ladder batteries, develop energy business, and promote the comprehensive replacement of lead-acid batteries by ladder batteries.The new energy subsidiary was established less than half a year ago, and its revenue contribution has reached nearly 1 billion. It is expected to continue to grow rapidly in the future. At the same time, the company will rely on major customer relationships to promote the shift from direct supply to direct supply, and its profitability is expected to further increase.   Risk factors: The progress of 5G station construction is gradual, downstream expansion is less than expected, and emerging business development is less than expected.   Investment suggestion: predict the company’s EPS in 2019/2020/2021 to be 0.54/0.64/0.80 yuan, using the segment assessment method, the traditional business / emerging business is given a target PE of 40/60 times in 2019, corresponding to a target price of 25.8 yuan, corresponding to 48 times of comprehensive PE, covering the first time with a “buy” rating