\u3000\u3000 Zte Corporation(000063) (000063)
Event: on January 28, 2022, the company released the performance forecast for 2021. According to the notice,
It is estimated that the net profit attributable to the parent company will be 6.5-7.2 billion yuan in 2021, with a year-on-year increase of 52.59% - 69.02%; Deduct non net profit of RMB 3-3.5 billion, with a year-on-year increase of 189.71% - 237.99%. The substantial increase in net profit is mainly due to: 1) the double-digit year-on-year growth of operating revenue in 2021; 2) In 2021, the gross profit margin recovered and improved year-on-year; 3) Under the situation of tight global chip supply, considering that the material preparation and production cycle are relatively long, the company accrues inventory falling price reserves based on the principle of prudence and prepares key materials in advance, resulting in an estimated asset impairment loss of about 1.4 billion yuan in 2021. Among them, the asset impairment loss in a single quarter in the fourth quarter was about 1.1 billion yuan. If the asset impairment loss in the fourth quarter is not considered, the net profit attributable to the parent company in the fourth quarter increased significantly month on month. We believe that the impairment of assets may be caused by the company's increasing chip reserves to ensure the company's production capacity under the environment of core shortage in 2021. If so, we expect to realize the reversal after the normal sales and delivery of products in 2022. At the same time, the previous market doubts about whether the company's supply is affected by core shortage may be supported and eliminated.
In his speech, the chairman of the board of directors mentioned that the company should continue to grow in 2022 and maintain stable business growth in 2022 according to the company's "first year growth curve"; On the other hand, we should increase the "innovation" and make the second curve focusing on government enterprises, consumers and new businesses rise rapidly, so as to achieve leapfrog development and enter the "world top 500" within 2-3 years. On the one hand, the company maintains the steady growth momentum of the first curve dominated by CT (Communication Technology) business, on the other hand, it increases "innovation", so that it (IT infrastructure + digital transformation, including servers and storage, 5g industry applications, automotive electronics, etc.), digital energy (including power supply, data center, new energy, etc.) The second curve represented by terminals (including mobile phones, mobile Internet products, smart homes, etc.) has achieved rapid growth.
The market structure of operators has improved and the market share has continued to increase. According to dell'orogroup, ZTE accounted for 10.5% of the global telecom infrastructure market share in the first half of 2021, up 0.4% from 2020, reaching the highest level in history, and the global market share of the company's operator business continued to rise. 1) On the wireless network equipment side, in the Chinese market: according to the operator's announcement, the company won 31.0% of the bid in the centralized procurement of 5g700m wireless network main equipment of China Mobile on July 18, 2021, and 39.34% of the bid in the procurement of 2.1g wireless network main equipment of China Unicom in July 2021, In the international market, according to dell'orogroup, the market share of 5g base station equipment has risen to 11% in 2020; 2) On the side of wired network equipment, ovum's market share ranks fourth in the world, with Q1 reaching 12.9% in 2021.
B-end business is expected to open the second growth curve. The company's government and enterprise business focuses on energy, finance, Internet, transportation, large enterprises and other fields. At present, it has reserved a series of products such as financial database, full module data center, server and storage, data communication equipment and so on. According to the company's announcement, from January to September 2021, China's government and enterprise revenue increased by more than 60% year-on-year, of which the server revenue doubled year-on-year. In terms of automobile, the company's wireless charging, 5g-v2x and on-board operating system go hand in hand to cooperate with vehicle enterprises. In July 2021, China FAW and the company signed a deepening strategic cooperation agreement in Changchun to strengthen cooperation in core technology, chip field, basic software, 5g application scenarios, etc. In August 2021, the company signed a cooperation agreement with Saic Motor Corporation Limited(600104) . The two sides will strengthen strategic collaborative innovation cooperation in vehicle basic software technology, basic hardware platform, cloud computing, intelligent Internet connection and other aspects. The company will also continue to promote cooperation with SAIC zero beam, Lianchuang Electronic Technology Co.Ltd(002036) and other companies.
The multi-point layout of meta universe is at the forefront of the industry. Zte Corporation(000063) has been deeply engaged in the ICT field for 36 years, with global technology accumulation and innovation. At present, low delay communication, graphics and image rendering and computational power algorithm are the main technical problems restricting the development of metauniverse. The company will continue to increase R & D investment, adhere to the innovation and accumulation of underlying technologies, and help the rapid development of metauniverse ecosystem. Zte Corporation(000063) many products are closely related to metauniverse. The company's processing, display, VR / AR and other terminal equipment are the bottom equipment of the meta universe; Metauniverse is inseparable from bandwidth, storage capacity and computing capacity. The company's cloud equipment, network equipment and other communication network equipment are the key path for metauniverse; It (Information Technology), CT (Communication Technology) and DT (data technology) platforms are the basic platforms of the meta universe and are their necessary infrastructure. In terms of wireless product layout, as early as 2020, the company promoted the research and preparation of metacell, metaradio and other technologies. Relying on the technology moat built by the company in the field of science and technology communication ICT for many years, its products are leading the industry in many aspects.
R & D investment has increased year by year. In 2020, the amount of R & D investment ranked top 10 of all A-share companies. In 2019 and 2020, the company's R & D expenses increased significantly, with growth rates of 15.1% and 17.9% respectively. In 2020q1-q3, the company's R & D expenses reached 14.171 billion yuan, a new high in recent five years, with a year-on-year growth rate of 31.32%, and the R & D expense rate reached a high of 16.9% in recent five years. In terms of patents, by the end of June 2021, the company had applied for about 80000 patents worldwide, including nearly 4400 chip patents and about 1950 authorized chip patents. The accumulation of patents and other intellectual property rights of the company has laid the foundation for patent monetization and operation mode. According to the report "leader of 5g patent competition" released by iplytics in February 2021, the number of necessary patent declarations of 5g standard disclosed to ETSI (European Telecommunications Standardization Association), including patents granted and patents being applied by all patent offices in the world, Zte Corporation(000063) ranks third in the world with 9.81%.
Investment suggestion: as the leader of Telecom ICT main equipment, the company has continuously improved the business market pattern of operators, made efforts to "new three kinds" of government and enterprise business, multi-point layout meta universe, and its performance is expected to continue to improve. We expect the company's revenue to be 115.18/132.45/151.76 billion yuan and net profit to be 68.7/84.4/11.14 billion yuan respectively from 2021 to 2023, with outstanding growth; Give 25 times PE in 2022, corresponding to the 12-month target price of 44.50 yuan, and maintain the investment rating of buy-a.
Risk tips: RMB exchange risk, overseas business growth caused by the epidemic is less than expected, the risk of aggravating Sino US trade friction, and the risk of business not meeting expectations
