\u3000\u3000 Zte Corporation(000063) (000063)
Event:
On January 29, 2022, the company released the performance forecast for 2021: it is expected to realize a net profit attributable to the parent company of RMB 6.5-7.2 billion in 2021, with a median of RMB 6.85 billion, a year-on-year increase of 52.59% – 69.02%; The net profit deducted from non return to parent was 3-3.5 billion yuan, with a median of 3.25 billion yuan, a year-on-year increase of 189.71% – 237.99%; The basic earnings per share was 1.40-1.55 yuan, with a year-on-year increase of 52.17-68.48%.
Comments:
The provision for inventory falling price was about 1.1 billion yuan, affecting the performance in the fourth quarter, and the annual revenue achieved double-digit year-on-year growth. According to the forecast data of the annual report, the company expects to realize a net profit attributable to the parent company of 647-1347 million yuan in the fourth quarter of 2021, a month on month decrease of 24.07% – 63.53% compared with 1.774 billion yuan in the third quarter, and an asset impairment loss of about 1.1 billion yuan in a single quarter in the fourth quarter. Mainly due to the shortage of global chip supply, the company prepares materials in advance for key materials. Considering the relatively long material preparation and production cycle of the company, Consistent with the previous policies, the provision for inventory falling price is made based on the principle of prudence. The annual asset impairment loss in 2021 is expected to be about 1.4 billion yuan. In 2021, the company’s operating revenue achieved double-digit year-on-year growth. Among them, the operating revenue of China, international market and operator networks, government enterprises and consumers all achieved year-on-year growth, the gross profit margin increased year-on-year, and the profitability continued to improve.
The company takes 5g as its development core strategy, focuses on ICT infrastructure, diversified development and promotes social digital transformation. The company has the ability of complete 5g end-to-end solutions, has the experience accumulation and leading technical advantages in chip, database, wireless, core network, bearer, fixed network, video, energy, terminal and industrial applications, and plays an important role in the transformation and upgrading of the real economy to digitization, networking and intelligence.
In the field of chips, the company focuses on the key technologies of independent design in the whole process of chips, continues to strengthen investment in core IP, architecture design, advanced packaging and digital and efficient development of chips, and continuously improves the basic ability of chip research and development; In the field of database, the company’s distributed database goldendb currently has commercial cases covering a full range of banking services of large state-owned banks, joint-stock banks, Rural Credit Union, urban commercial banks and rural commercial banks, and has become a mature, stable and leading domestic financial level distributed database; In the field of operating system, the company’s operating system products have been widely used in communication, automobile, electric power, rail transit and other industries. By 2021h1, more than 200 million sets had been shipped worldwide; 2.4 million wireless base stations have been delivered in China’s three fields, including 5g + government and 1g + smart ports, with a total of 2.4 million wireless base stations delivered in China’s three major cities; In the IP field, zxr10t8000, the flagship product of the company’s core router, entered the core node of China Telecom Corporation Limited(601728) cn2 backbone network, and the IP product won the bid for 70% of the SDN bid section of phase III of China mobile network cloud; In the field of optical transmission, the company’s market share of 200g + optical transmission in China ranks the top two, and OXC has taken the lead in commercial use in China Mobile’s inter provincial backbone transmission network; In the field of fixed network access, the company’s home information terminals have achieved leapfrog growth, with more than 500 million units shipped by 2021h1, of which ponont has the largest shipment volume in the world, wi-fi6 products have been commercialized on a large scale in Japan, Italy, Thailand and Spain, and hol (whole house optical fiber Networking) has completed pilot and commercial use in more than 20 provinces in China; In the field of video, the company integrates the competitiveness of CDN products and leads the commercial progress. There are more than 150 sites in the world, the total capacity of users of large video system exceeds 200 million, and the market share is further improved; In the field of communication energy, the company’s energy products serve more than 160 countries and regions around the world, and a full range of 5g power supplies have provided power supply guarantee for more than 300000 5g stations around the world; In the field of data center, as of 2021h1, the company’s data center products have more than 300 project cases in the world, deployed more than 100000 racks, and the computer room area has exceeded 1.1 million square meters; In the field of 5g + industrial Internet, the company, together with 500 + partners, has widely carried out 5g + innovation practice in 15 industries such as electronic manufacturing, steel, metallurgy, mining, electric power, rail transit, port, new media, culture and tourism, and has created more than 60 demonstration projects worldwide.
In the second half of 2021, the prosperity of 5g base station construction rebounded and the company’s performance improved. In the first half of 2021, the 5g bidding of Chinese operators was delayed, the construction slowed down, and the outlook of the upstream industrial chain was low. From June to July, radio, television, China Mobile and China Unicom successively launched the centralized purchase of 5g base stations, and China’s construction boom picked up in the second half of the year. Among the large-scale centralized purchase projects of operators announced successively, Zte Corporation(000063) high-end routers, high-end switches, servers, storage and other products have made good progress, and the market share of 5g wireless, core network, bearer and other key products has continued to increase. Looking forward to 2022, we judge that the capital expenditure of Chinese operators is expected to maintain a small growth, and the prosperity of the industry is expected to maintain.
Consumer business continued to improve. Consumer business is part of the company’s end-to-end complete communication solution and one of the directions to support future business growth. 5g era company will continue to firmly develop consumer business. In the first three quarters of 2021, the revenue of mobile phones and home information terminals maintained a year-on-year rapid growth, of which the revenue of mobile phones and home information terminals increased by about 40% and 90% respectively. The new generation of off screen camera phone axon30 was launched worldwide, leading the update and iteration of off screen camera technology; Axon30ultra, the flagship of three main cameras and four array images, took the lead in launching fusion computing photography. The sales of 5g mobile Internet products have exceeded 30 countries and regions.
Profit forecast, valuation and rating: we are optimistic about the market prospect of the company as the world’s top four main equipment manufacturers under the global 5g construction wave. We maintain the net profit forecast of 7 / 77 / 8.4 billion yuan for 21-23 years, corresponding to pe20x / 18x / 17x, and maintain the “overweight” rating.
Risk tip: 5g construction peak fall risk, industrial chain price reduction risk, operator capital expenditure decline risk.
