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CHINACOMSERVICE(552)
Analysis¡G
The Chinese government plans to invest 2 trillion RMB over the next five years to build nationwide AI data centers. This represents a direct and highly certain major positive for China Communications Services (552). As a company controlled by China Telecom Group and jointly held by the three major telecom operators, China Communications Services serves as the national-level ¡§main force¡¨ in communications infrastructure construction. It has long held the leading position in the data center EPC (Engineering, Procurement, and Construction) and operations & maintenance market. Being the ¡§core son¡¨ and key supplier to these major telecom giants (with the domestic operator market accounting for more than half of its revenue), the company is well-positioned to directly secure the largest share of orders for data center planning, design, civil construction, and electromechanical installation.
AI data centers differ significantly from traditional ones, requiring extremely high-density power deployment and advanced liquid cooling systems. China Communications Services possesses strong technical barriers in next-generation liquid cooling engineering for intelligent computing centers (for example, its subsidiary China Post Construction has won data center engineering awards for many consecutive years). These high-tech engineering upgrades are expected to significantly increase both the average contract value and profit margins in its Telecom Infrastructure Services (TIS) segment. At the same time, data center operations follow the principle of ¡§30% construction, 70% management.¡¨ As a large number of intelligent computing center rooms come online over the next five years, demand for daily operations and maintenance, energy-saving and emission-reduction optimization, and equipment replacement will grow exponentially. This is expected to bring long-term, stable, high-margin data center operations & maintenance contract revenue to the company¡¦s Business Process Outsourcing (BPO) segment, while also reducing its reliance on traditional communications engineering projects.
The national core objective is to achieve ¡§nationwide integrated interconnection¡¨ of decentralized data centers by 2028. China Communications Services¡¦ Applications, Content and Others (ACO) segment, which includes software development and system integration, will fully participate in building the software systems for the national sovereign computing power network interconnection. This is expected to drive sustained double-digit growth in its software and big data business revenue. In the past two years, as 5G capital expenditure by telecom operators peaked and then declined, China Communications Services¡¦ performance reflected this slowdown (its 2025 operating revenue and net profit both grew only 0.1% year-on-year, while gross margin fell 0.4 percentage points to 11.3%). The 2 trillion RMB in ¡§new infrastructure¡¨ funding, primarily provided through ultra-long special treasury bonds and strategic funds, effectively injects a fresh and massive funding pool into the company.
Strategy¡G
Buy-in Price: $4.25, Target Price: $4.70, Cut Loss Price: $4.00
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ZHOU HEI YA(1458)
Analysis¡G
Zhou Hei Ya is a well-known Chinese leisure cooked marinated food company headquartered in Wuhan, Hubei Province. Its main business covers marinated duck, duck by-products, marinated red meats, and vegetables, renowned for its unique "sweet and spicy" flavour and proprietary herbal spice blend. In 2025, the company achieved full-year revenue of RMB 2.536 billion, up 3.5% year-on-year; net profit attributable to parent company shareholders was RMB 157 million, up 59.6% year-on-year. Store count returned to above 3,000, reaching 3,019 by year-end, with average monthly sales per store increasing 13.6% year-on-year. The company added over 5 million new members during the year, with overseas expansion into 12 countries. On the channel front, a newly established business unit gained access to over 80 key systems including Sam's Club and Pang Dong Lai, covering nearly 40,000 retail points; its first overseas direct-operated store opened in Malaysia. On the product front, the company collaborated with Sichuan Shentang to launch 29 SKUs of compound seasonings including hotpot base and noodle sauces, expanding into home cooking and quick-meal scenarios. We believe the company is at a critical inflection point towards operational quality recovery. The substantial improvement in store efficiency in 2025, the establishment of a "store + channel" dual-drive model, notable profit recovery, together with a proactive shareholder return policy and currently low valuation, present an attractive investment opportunity.
Strategy¡G
Buy-in Price: $1.42, Target Price: $1.60, Cut Loss Price: $1.30
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Foryou Group (002906.CH) - Second Growth Curve Gradually Becoming Clear
Company profileForyou Corporation was established in 1993 and is mainly engaged in the R&D, production and sales of automotive electronics and precision die-casting businesses. The Company's automotive electronics business mainly covers two core sectors, namely smart cockpit and advanced driver-assistance systems. Its precision die-casting business is centred on precision mould design and manufacturing technology, covering aluminium alloy, magnesium alloy and zinc alloy product lines. In addition, it actively explores and develops AI, robotics and other related businesses, including optical communication modules, AI high-speed connectors, robotics and other related component businesses. In 2025, the Company reported revenue of RMB13,048 million, up 28.46% yoy; net profit attributable to the parent company was RMB782 million, up 20.00% yoy. Investment SummaryQ1 Revenue Maintained High Growth
In Q1 2026, the Company reported revenue/net profit attributable to the parent company/net profit excluding non-recurring items of RMB3,096 million/RMB166 million/RMB159 million, respectively (RMB, the same below), up 24.37%/6.61%/5.89% yoy, respectively. Gross margin was 16.5%, down 1.7 ppts yoy. The slower profit growth compared with revenue growth was mainly due to factors such as price competition and rising raw material prices. The Company has established a raw material price linkage mechanism with most of its customers, and its operating results are expected to improve significantly from Q2. Automotive Electronics Business Continued to Grow, With Its Leading Position in Smart Cockpit Firmly EstablishedThe Company's automotive electronics business reported revenue of RMB9,675 million in 2025, up 27.25% yoy, accounting for 74.15% of total revenue. CAGR reached 35.66% from 2020 to 2025, maintaining high-quality growth. The Company has built a comprehensive product matrix and solution capabilities in the smart cockpit field. The market shares of HUD, in-vehicle wireless charging and other products continued to rank first in China, while the market shares of LCD instrument panels and central control screens rapidly rose to the forefront of the industry. The Company's customer structure continued to optimise, with a low dependence on any single customer, and the revenue contribution from some new energy vehicle makers and international automotive brands increased. Revenue from customers including Changan, BAIC, Xiaomi, Dongfeng, STELLANTIS, SAIC Volkswagen, BYD, Xpeng, NIO and Leapmotor increased significantly. Leveraging the ADAYO Automotive Open Platform (AAOP), the Company provides customers with "one-stop" overall smart cockpit solutions based on its implementation capabilities in cockpit domain controllers across multiple platforms including Qualcomm, SemiDrive and MediaTek, as well as mainstream large models, demonstrating significant platform-based competitive advantages. Precision Die-Casting Business Improved Its Process Technologies, Enhancing Overall CompetitivenessThe Company overcame a number of difficult technical challenges in mould design and manufacturing, expanded the application of highly flame-retardant magnesium alloy materials, and promoted the deep integration of 3D vision guidance with AI and robotics to improve the flexible changeover capability of automated manufacturing cells. Its capabilities in complex and difficult production processes, including high-vacuum combined extrusion, friction stir welding of aluminium-magnesium alloys, profiling spraying, multi-spindle machining and vacuum adsorption, continued to improve. The precision die-casting business delivered particularly impressive performance in 2025, reporting revenue of RMB2,859 million, up 38.47% yoy, with growth exceeding that of the automotive electronics business. CAGR reached 35.08% from 2020 to 2025. Second Growth Curve Gradually Becoming Clear, with Capacity Expansion Releasing Growth MomentumThe Company actively explores non-automotive businesses such as AI and robotics: 1) In the AI infrastructure field, optical communication modules, high-speed connectors and data centre cooling system components have secured project nominations; 2) In the robotics field, the Company has received orders for robotics display screens and joint module components, and jointly developed robotics main and auxiliary controllers, with brand momentum surging and sales increasing exponentially. Following a record-high scale of capacity construction in 2025, capital expenditure is expected to remain at a high level in 2026, focusing on the Thailand Production Base, the expansion of the Automotive Electronics Huizhou Base, the expansion of the zinc alloy die-casting business in the AI field, and Phase III of the Precision Die-Casting Changxing Project. Capacity expansion is being carried out based on orders on hand, providing solid support for sustained business growth going forward. Among them, the Thailand Production Base is expected to commence production in Q4 2026, providing strong support for overseas business expansion. Investment ThesisThe Company's traditional automotive business is growing steadily and rapidly, while its non-automotive business offers enormous growth potential. We are optimistic about the long-term development of the Company and expect EPS to be 1.81/2.18/2.63 yuan respectively for 2026/2027/2028, a yoy increase of 22%/21%/21%. We offer a target price of 36.3 yuan, respectively 20/16.6/13.8x P/E for 2026/2027/2028, and an "Buy" rating. (Closing price as at 5 June) Historical P/E Band 
Source: Wind, Company, Phillip Securities Hong Kong Research
RiskProgress of new production line is below expectations
Electric vehicle sales fall short of expectations
Macroeconomic downturn affects product demand
Sharply rising raw material prices or sharply falling product prices Financials
(Closing price as at 5 June) Download PDF Version
| Recommendation on 11-6-2026 | | Recommendation | BUY (Initiation) | | Price on Recommendation Date | $ 28.340 | | Suggested purchase price | N/A | | Target Price | $ 36.300 |
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