\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Performance review
The company released its annual report for 2021 on March 8. During the reporting period, the company achieved an operating revenue of 114.52 billion yuan, a year-on-year increase of 12.9%; The net profit attributable to common shareholders of listed companies was 6.81 billion yuan, a year-on-year increase of 59.9%; Deduct non net profit of RMB 3.31 billion, with a year-on-year increase of 219.2%. Overall, it is in line with expectations.
Business analysis
The operation is improving in an all-round way, with high net profit growth. Benefiting from the operator's business gross profit returning to 42% + level as scheduled, the company's overall gross profit increased by 3.6pp to 35.2%. From the perspective of revenue structure, the proportion of the company's operators, government enterprises and consumer business in 21 years was 66% / 1% / 23% respectively. Compared with 73% / 1% / 16% in 20 years, the proportion of consumer business increased significantly. The business income of the company's operators increased by 2.3% at the same time, which is equivalent to the increase of capital expenditure of global and Chinese operators. Benefiting from the spread of overseas 5g construction from developed markets to developing markets, the company's 5g market share in China is expected to continue to increase, and the business growth of the company's operators is expected to increase slightly in 22 years. The government enterprise business grew by 16% in 21 years, slightly lower than expected. Benefiting from the deepening digitization of the industry and the enhancement of the company's competitiveness, the growth rate in 22 years is expected to return to 20% +.
Core advantages are stable and new businesses are developing. In terms of 5g, the company's share of 5g base stations continues to rank second in the world, and the number of necessary declarations of 5g standards ranks fourth in the world. In the chip field, the company has the industry-leading chip whole process design ability, the proportion of terminal chip self-development reaches 50%, the annual revenue of ZTE microelectronics is close to 10 billion, and the export share is increasing. In terms of government and enterprises, the company's server and storage products have delivered more than 150000 units globally in 21 years, and have entered the leading customers in finance, Internet, energy and other industries on a large scale; Goldendb has operated stably in large commercial banks for more than three years and expanded to key areas such as operators. The automotive electronics business is ready to go, and strategic cooperation agreements have been reached with FAW and Saic Motor Corporation Limited(600104) .
Open a new stage of quality growth. Under the background of stable capital expenditure of global operators, the company's global share improvement is the core logic of growth in the next 3-5 years. Its global wireless market share is expected to evolve from 12% to 20% and China's market share is expected to evolve from 30% to 40%. At the same time, with the overflow of ICT capabilities accumulated by the company in the communication field for many years, the company's second growth curve government enterprise business has entered the fast lane. The capability value of new business areas such as semiconductor and automotive electronics is expected to be gradually recognized by the market. The company will open a new stage of quality growth, and the market valuation center is expected to gradually rise.
Profit adjustment and investment suggestions
We lowered the growth expectation of business income of the company's operators, adjusted the net profit attributable to the parent company of 9.1 (- 14%) / 11.3 (- 9%) billion yuan in 22-23 years, and predicted the net profit attributable to the parent company of 13.4 billion yuan in 24 years. The company is optimistic about the rapid growth of new businesses such as government enterprises, semiconductors and automotive electronics while expanding the market share of global and Chinese equipment manufacturers. It is given a 22-year 31 times PE and a target price of 60 yuan, and reiterates the "buy" rating.
Risk tips
5g commercialization is less than expected, operators' capital expenditure is less than expected, Sino US trade friction is intensified, mobile terminal business fluctuation risk, new business expansion of automotive electronics is less than expected, and core talents drain.
