\u3000\u3000 Zte Corporation(000063) (000063)
Company announcement: the company released the performance forecast for 2021. It is expected to realize the net profit attributable to the common shareholders of listed companies ranging from 6.5 billion yuan to 7.2 billion yuan in 2021, with a year-on-year increase of 52.6% – 69.0%, and the net profit attributable to the common shareholders of listed companies deducting non recurring profits and losses ranging from 3 billion yuan to 3.5 billion yuan, with a year-on-year increase of 189.7% – 238.0%. EPS is 1.40-1.55 yuan.
The annual performance was in line with expectations, and the asset impairment loss of 1.1 billion yuan was withdrawn in Q4. The company expects the median net profit attributable to the parent company to be 6.85 billion yuan, a year-on-year increase of 60.8%. Q4 single quarter net profit attributable to the parent company is expected to be 647 million yuan – 1.347 billion yuan, with a median of 997 million yuan, a year-on-year decrease of 35.59%. Among them, the asset impairment loss in Q4 was about 1.1 billion yuan, which was mainly due to the shortage of global chip supply. The company prepared the key materials in advance. Considering the relatively long preparation and subsequent production cycle, the provision for inventory falling price was made based on the principle of prudence, which had a great impact on Q4 profits. Throughout the year, the company’s operating performance met expectations. Facing the challenges of the complex external environment and covid-19 epidemic, the company adhered to the business philosophy of strengthening the foundation and expanding the new and quality growth, deeply participated in the global 5g construction, and actively promoted the government, enterprises and consumer business while steadily developing the network business of operators and improving the competitiveness of high-value products The operating revenue of the three major businesses in the international market and operator networks, government enterprises and consumers increased year-on-year. The company strengthened its internal governance and its main business improved in an all-round way. In 2021, its gross profit margin recovered and improved year-on-year, and its profitability increased significantly.
Consolidate the advantages of CT field and continuously improve the business market share of operators. The company is an important partner in the network construction of global operators, continuously optimizing product performance and market pattern, and maintaining the steady growth of operators’ network business. In the Chinese market, the company improves its competitiveness and realizes the transformation to a core supplier. Among the large-scale centralized procurement projects of operators successively announced in the second half of the year, the company made good progress in high-end routers, high-end switches, servers, storage and other products, and the market share of key products such as 5g, core network, bearer, servers and storage continued to increase. On the basis of continuous improvement in technology leadership, product innovation, agile R & D and efficient delivery, the company has comprehensively carried out joint R & D innovation and digital industry expansion with operators to jointly meet the opportunities and challenges of the digital intelligence era. In the overseas market, the company grasps the market opportunities such as 4G modernization, 5g new construction, optical fiber transformation of fixed network, bearer network upgrading and home broadband upgrading, further optimizes the pattern of products and markets, and helps overseas operators provide diversified digital services with technology, product and scheme innovation. According to dell’orogroup, the company’s global telecom infrastructure market share increased to more than 10% in the first half of 2021, reaching a record high. It is expected that the company’s global operator business market share will continue to rise.
Actively build the second growth curve and strengthen the expansion in new fields. In recent years, the company has actively invested in government, enterprise and consumer business. In the field of it, the company focuses on building the bottom competitiveness of IT products such as servers and storage, operating systems and databases, quickly forming 10 billion products and forming a strong digital base. For specific subdivided industries, the company has established two industry special teams of mining, metallurgy and steel, enabling digital transformation and realizing the in-depth expansion of 5g industry application market. In addition, the company also extends the software and hardware advantages of ICT technology to the field of automotive electronics, establishes an automotive electronics product line, and is committed to providing customers with basic software and hardware platforms related to automotive electronics, chips, intelligent network products of vehicle road coordination, etc., so as to meet the needs of automotive enterprises in an integrated way. At present, the company has reached strategic cooperation with FAW, Saic Motor Corporation Limited(600104) and other automotive enterprises. In the field of digital energy, the company established the digital energy operation Department in 2022 to officially enter the new energy market. In the field of terminals, the company continued to make efforts in terms of brands, products and channels, focusing on improving the user experience of mobile phone products and increasing the construction of brand channels. At the same time, the company established a new smart home product line, gave full play to the advantages of home broadband network products, and vigorously expanded consumer oriented home intelligent terminal products.
Investment suggestion: the company is China’s ICT leader, focusing on business restructuring, deepening competitive advantage, actively responding to industrial trends and exploring new markets. At the same time, the company strengthened cost control and continuously improved profitability. We expect the net profit attributable to the parent company from 2021 to 2023 to be RMB 7.405 billion, RMB 8.567 billion and RMB 9.518 billion respectively, corresponding to EPS of RMB 1.60, RMB 1.85 and RMB 2.05 respectively, maintaining the buy rating.
Risk warning: Sino US trade risk, operator investment less than expected risk, customer credit risk, exchange rate risk, competition risk and technology risk.
