Zte Corporation(000063) ( Zte Corporation(000063) ) event: on the evening of March 8, the company released its 2021 annual performance report. The company achieved revenue of 114.52 billion yuan, a year-on-year increase of 12.9%, 78.07 billion yuan in the Chinese market and 36.45 billion yuan in the international market. The net profit attributable to the parent company was 6.81 billion yuan, a year-on-year increase of 59.9%, deducting non net profit of 3.31 billion yuan, a year-on-year increase of 219.2%, and the operation quality continued to improve.
Revenue growth accelerated, and all business lines continued to improve. According to the company’s annual report, the revenue of the company’s three business lines (operator network, government enterprise business and consumer business) has achieved positive year-on-year growth, of which the government enterprise business has increased by 16% year-on-year, mainly due to the contribution of services such as servers, and the consumer business has increased by 59% year-on-year, mainly due to the contribution of products such as mobile phones and home information terminals. The company’s operators performed well on the wireless and wired sides, helping customers build the best cost-effective 5g network. The optical network continued to take the lead, and the routers and video products performed well. The company actively implements the dual carbon strategy, helps customers build an end-to-end green and low-carbon network, and continuously enables vertical industries to save energy and reduce emissions.
The operation quality continues to improve, and the provision for impairment affects the short-term performance. The company’s comprehensive gross profit margin increased by 3.63 percentage points to 35.24% in 2021, mainly due to the increase of network gross profit margin of operators. The network gross profit margin of operators increased by 8.66 percentage points to 42.45%, and the profitability continued to improve by continuously optimizing the cost structure. The company’s asset impairment loss in 2021 is expected to be about 1.4 billion yuan, of which the asset impairment loss in Q4 is about 1.1 billion yuan in a single quarter. This is mainly due to the company’s early preparation of key materials under the tight global chip supply, which has an impact on the company’s net profit in the short term. The company’s early preparation ensures the normal operation of all business lines, reflecting the importance it attaches to supply chain management.
In the large cycle of scientific and technological innovation, the main equipment leader is expected to ride the wind and waves. As a global leader in main equipment, the company has been fully distributed in 5g, ICT, consumer electronics and other fields. Through continuous R & D investment, the company has accumulated rich product technology experience. At the same time, it pays attention to compliance and standardized management, and its supply chain management ability has also been continuously improved. Under the current background of developing digital economy, as the leader of information technology, the company is expected to achieve sustained growth in all businesses. In recent years, the company’s fundamentals have continued to improve and its operation is stable and upward. Under the general trend of scientific and technological innovation and digital upgrading, the company is expected to seize historical opportunities and open up new growth space.
Investment suggestion: we expect that the three business segments of the company will continue to develop steadily, among which the government enterprise business and consumer business are expected to continue to maintain a high growth rate. We predict that the company’s net profit attributable to the parent company from 2022 to 2024 will be RMB 8.79 billion, RMB 9.80 billion and RMB 10.57 billion, corresponding to EPS of RMB 186, RMB 207 and RMB 2.23, and the corresponding PE of the current stock price will be 13.8, 12.4 and 11.5 respectively, maintaining the “buy” rating.
Risk tip: the price of 5g network equipment has decreased; Sino US trade frictions intensified.
