Hytera Communications Corporation Limited(002583) (002583)
1. Event overview
The company announced that its wholly-owned subsidiary Hytera Communications Corporation Limited(002583) communication (Hong Kong) Co., Ltd. has signed a contract for the procurement of special communication equipment and related technical services with an overseas entity. The project is mainly to build a digital trunking communication system and provide digital trunking communication terminal products for customers in an African country, with a total contract amount of USD 9.6309 million (about RMB 61.29 million).
2. Orders in overseas markets continue to recover and the future growth can be expected
Affected by Motorola’s patent litigation and overseas epidemic, the company’s overseas market orders shrank seriously in the past year. In 2020, the company announced only three major contracts, all in the second half of 2020.
In 2021, the company’s orders, especially those in overseas markets, recovered rapidly. As of December 15, 2021, 9 major contracts (including orders for Shenzhen Metro, Brazilian federal Road police, industry partners of a country in Central Asia, Spain Telecom, Shenzhen Nanshan District government, Bahia, Brazil and customers in a country in Africa to build digital trunking communication system) have been announced successively, Compared with the same period last year, the orders improved significantly year-on-year, especially in the overseas market, the company’s orders continued to recover, indicating that the impact of the patent event on the company’s overseas business gradually decreased, and the orders in the overseas market continued to improve.
3. Shenzhen’s state-owned assets increased, and the company’s operating pressure decreased
On November 1, the company announced that Shenzhen win-win fund transferred 10% equity of Chen Qingzhou, the controlling shareholder of the company, out of confidence in the future development of Hytera Communications Corporation Limited(002583) and expectation of its good investment value.
Shenzhen investment holding, the parent company of Shenzhen investment holding Capital Co., Ltd., the manager of win-win fund, is a state-owned capital investment company and comprehensive financial holding group in Shenzhen. It is one of the world’s top 500 enterprises, and its business covers three sectors: financial holding, science and Technology Park and industrial investment.
The background of shareholders of state-owned enterprises plays a strong role in endorsing the company’s Bank credit and business operation, supporting the long-term sound and rapid development of the company.
4. The non private network market continues to make market breakthroughs and lay the foundation for long-term growth
The company’s new businesses such as broadband / 5G and public-private integration began to make substantive breakthroughs, and the new signed orders increased significantly compared with last year.
5. Investment advice
The repeated overseas epidemic still has a certain impact on overseas business orders. The recovery of overseas orders is slightly lower than expected, reducing the forecast of future revenue. However, considering the continuous release of new orders signed by the company and the gradual growth of China’s order business, we continue to be optimistic about the company’s leading position in the private network. With the mitigation of the overseas epidemic, the company’s business is expected to continue to recover, and the improvement of the demand for China’s rail transit, 5g and public security private network is also expected to drive the basic improvement of the company.
We lowered our profit forecast. It is estimated that from 2021 to 2023, the revenue will be reduced from RMB 7.05/81.5/9.46 billion to RMB 5.15/59.8/6.98 billion, and the earnings per share will be reduced from 0.22/0.27/0.32 to RMB 0.14/0.22/0.27, corresponding to the closing price of RMB 5.32/share on December 16, 2021, and the PE will be 39.6/25.7/20.9 times respectively, maintaining the “overweight” rating.
6. Risk tips
The overseas epidemic situation continues and repeats, and the customer orders are not sustainable; Sino US science and technology war leads to the instability of the company’s supply chain; Patent disputes with Motorola require large compensation.
