Overview of the 2023 Annual Report on the Communication Industry: Focusing on AI Computing Power and Operators

The telecommunications industry in 2023 presents the following characteristics:

1. The revenue growth rate in the industry is high at first and low later. The telecommunications industry achieved a revenue of 28,637 billion yuan for the whole year, a year-on-year increase of 5.3%. Excluding the three major operators and ZTE Corporation, the revenue reached 8,307 billion yuan, a year-on-year increase of 2.7%.

2. Industry profits are under pressure. The telecommunications industry achieved a net profit attributable to shareholders of 200.6 billion yuan, a year-on-year increase of 3.2%. Excluding the three major operators and ZTE Corporation, the net profit attributable to shareholders was 20.54 billion yuan, a year-on-year decline of 18.3%.

3. AI acceleration drives performance release. In the first quarter of 2024, the performance of leading AI hardware companies such as optical modules accelerated, driving the industry's revenue and profits to rebound.

4. Sub-industry differentiation has intensified. Operators, satellite communication and navigation sectors have performed well, while some sectors are under profit pressure.

5. The industry expense ratio remains stable, and leading companies are increasing their R&D investment.

6. Operating cash flow continues to improve, inventory turnover accelerates.

Looking ahead to 2024, it is recommended to focus on:

1. AI Hardware: Focus on optical modules, optical devices, PCBs, heat dissipation, and other industry chains.

2. Operators: As dividend assets and future Computing Power bases, the three major operators are expected to continue benefiting.

Investment strategy: adopt a "AI hardware" + "operator" dumbbell strategy, focusing more on leading targets.

Core targets: Zhongji Xuchuang, Xinyi Sheng, Tianfu Communication, Huadian Co., Ltd., Shennan Circuit, Yingweike, China Mobile, China Telecom, China Unicom, etc.