Haitong International's mid-term performance summary for the telecommunications industry in 2025: Profit acceleration, impressive computing power performance.

HAITONG INT'L released a research report stating that the communication industry is currently under-allocated, with capital expenditures in computing power maintaining a high growth phase. The Chinese domestic market is also closely following the global AI development process, entering an accelerated phase, and there is still significant room for upside in the communication industry holdings. By 2025, the AI computing power industry chain will continue to accelerate development, coupled with continuous evolution in inference-side demand, which is expected to bring broader growth opportunities, benefiting the communication industry's related industry chain. It is recommended to continue to focus on industry-relevant investment opportunities. Key areas to focus on include: 1. Optical modules: Zhongji Innolight/Eoptolink Technology Inc./Accelink Technologies/Huagong Tech/Wuxi Taclink Optoelectronics Technology; 2. CPO/Silicon Photonics: Suzhou TFC Optical Communication/Henan Shijia Photons Technology/Yuanjie Semiconductor Technology/Advanced Fiber Resources/Suzhou Everbright Photonics/T&S Communications; 3. PCB: Wus Printed Circuit/Shennan Circuits; 4. End-side: Fibocom Wireless Inc./ZTE Corporation; 5. IDC/Liquid Cooling: Wangsu Science & Technology/Guangdong Aofei Data Technology/Beijing Sinnet Technology; 6. Network side: ZTE Corporation/Ruijie Networks/Unisplendour Corporation/Fiberhome Telecommunication Technologies/Shenzhen Phoenix Telecom Technology; 7. High-speed copper cables: Zhejiang Zhaolong Interconnect Technology; 8. Telecom operators: China Mobile Limited/China Telecom Corporation/China United Network Communications; 9. Military communication-related targets: Guangzhou Haige Communications Group Incorporated/Tianjin 712 Communication & Broadcasting/Yangtze Optical Electronic; 10. US-stock-related targets: Credo, MaxLinear, Arista Networks, VNET Group, Coherent, Lumentum, Broadcom, Marvell, AXT. HAITONG INT'L main points are as follows: In the first half of 2025, the overall revenue and profitability of the communication industry showed healthy growth. With 91 companies in the industry as samples, the communication industry achieved total revenue of 1.785 trillion yuan (year-on-year +10.07%), net profit attributable to parent company of 160.432 billion yuan (year-on-year +11.26%), and non-recurring net profit attributable to parent company of 149.023 billion yuan (year-on-year +13.04%). In the second quarter of 2025, the communication industry saw steady revenue growth and an acceleration in profitability. With the same 91 companies as samples, total revenue reached 942.483 billion yuan (year-on-year +10.91%), net profit attributable to parent company of 98.682 billion yuan (year-on-year +12.33%), and non-recurring net profit attributable to parent company of 91.262 billion yuan (year-on-year +12.94%). From a sector perspective, in the first half of 2025, the optical module, communication PCB, network equipment vendors, and IoT module sectors showed better overall performance, with revenue and net profit growth rates ranking in the top five in the industry. In the first half of 2025, the top five sectors in terms of revenue growth were optical modules, communication PCB, network equipment vendors, IoT modules, and RF-related components for base station equipment, while the top five sectors in terms of net profit growth were optical modules, communication PCB, network security and visual analysis, IoT modules, and network equipment vendors. In the second quarter of 2025, the optical module, communication PCB, network equipment vendors, and IoT module sectors saw high growth performance, with revenue and net profit growth rates ranking in the top five. The industry is currently under-allocated, with capital expenditures in computing power maintaining a high growth phase, and the Chinese domestic market closely following the global AI development process, entering an accelerated phase. Since 2024, NVIDIA Corporation has continued to accelerate GPU capability upgrades, with Broadcom Inc. AI-related revenues and shipments of network-side exchange chips growing rapidly, and North American cloud computing giants continue to accelerate their investment. This continued trend is expected to drive companies closely related to overseas AI industry chains to achieve impressive performance. It is predicted that the AI computing power industry chain will continue to accelerate development in 2025, coupled with continuous evolution in inference-side demand, providing broader growth opportunities, and benefiting the communication industry's related industry chain. Risk warning: Impact of US-China trade frictions; Industry investment lower than expected; Demand lower than expected.