\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Event:
On March 9, 2022, the company released its annual report for 2021: the operating revenue in 2021 was 114522 billion yuan, a year-on-year increase of 12.88%; The net profit attributable to the parent company was 6.813 billion yuan, a year-on-year increase of 59.94%; The net profit deducted from non parent company was RMB 3.306 billion, with a year-on-year increase of 219.23%. The gross profit margin of the company in 2021 was 35.24%, with a year-on-year increase of 3.63 PCTs; The net interest rate was 6.14%, with a year-on-year increase of 1.49pcts.
The company’s operating revenue in 2021q4 was 30.696 billion yuan, a year-on-year increase of 12.35% in a single quarter; The net profit attributable to the parent company was 960 million yuan, a year-on-year decrease of 37.97% in a single quarter; The net profit deducted from non parent company was -32 million yuan, compared with -410 million yuan in the same period last year, and the year-on-year loss decreased significantly.
Comments:
In 2021, the operating revenue and net profit of the company reached a record high, and the three major businesses outside China and China achieved year-on-year growth. In 2021, the company achieved operating revenue and net profit attributable to the parent company of 114522 billion yuan and 6.813 billion yuan respectively, with a year-on-year increase of 12.88% and 59.94% respectively, both reaching a record high. In the fourth quarter, the provision for inventory falling price was about 1.1 billion yuan based on the principle of prudence, which had a certain impact on the performance of a single quarter. In 2021, the company achieved year-on-year growth in the two major markets of China and the world, as well as the three major businesses of operator networks, government enterprises and consumers.
Business outside China: the company achieved an operating revenue of 78.07 billion yuan in the Chinese market, with a year-on-year increase of 14.7%, accounting for 68.2% of the overall operating revenue; The international market realized an operating revenue of 36.45 billion yuan, a year-on-year increase of 9.1%, accounting for 31.8% of the overall operating revenue.
Operator network business: the company adheres to the leading technology in key fields, increases investment in core technologies such as chips, algorithms and network architecture, maintains technical advantages, focuses on the network evolution needs of operators, and provides innovative technologies and product solutions such as wireless access, wired access, bearer network, core network, Telecom software system and services. The company deeply participated in the large-scale construction of 5g and digitization in China, continuously consolidated its position as a strategic supplier, continued to cultivate the overseas value market and deepened healthy operation. The annual operating revenue was 75.71 billion yuan, with a year-on-year increase of 2.3%, and the gross profit margin was 42.45%, an increase of 8.66 percentage points compared with 33.79% in the same period of last year, mainly due to the continuous optimization of the cost structure of the company.
In 2021, the company’s 5g base station delivery volume ranked second in the world, the optical network revenue ranked second in the global operator market share, and the optical access and optical transmission related products maintained the leader ranking.
Government and enterprise business: the company is committed to becoming a “road builder of digital economy”. It will continue to maintain the investment of government and enterprise business resources, accelerate the expansion of key industries, focus on the needs of government and enterprise customers, and provide various information solutions for the government and enterprises based on products such as “communication network, Internet of things, big data and cloud computing”. Seizing market opportunities such as new infrastructure, industry digital transformation and dual carbon economy, the company focused on core products and top customers, strengthened channel capacity-building, and achieved overall rapid growth in energy, transportation, government affairs, finance, Internet, large enterprises and other markets. The annual operating revenue reached 13.08 billion yuan, a year-on-year increase of 16.0% and the gross profit margin was 27.05%, Compared with 28.82% in the same period of last year, it decreased by 1.77 percentage points, mainly due to the decline in the gross profit margin of international government and enterprise business. The operating revenue of China’s government and enterprise businesses increased by more than 40% year-on-year, of which the operating revenue of servers and storage doubled year-on-year.
Goldendb distributed database has operated stably in the core system of large commercial banks for more than three years. IDC intelligent management system has been widely used in Internet head customers, with commercial 140000 + racks.
Consumer business: the company gradually integrates mobile phones, broadband Internet, terminal chip modules and ecological capabilities to form a “big terminal”, create a full scene intelligent ecology, focus on consumers’ intelligent experience, develop, produce and sell smart phones, mobile data terminals, home information terminals, integrated innovation terminals and other products, as well as relevant software applications and value-added services. The company continued to make efforts in terms of brands, products and channels, promoted the sales of personal and family products, and achieved rapid growth. The annual operating revenue was 25.73 billion yuan, with a year-on-year increase of 59.2%, and the gross profit margin was 18.20%, down 5.38 percentage points from 23.58% in the same period of last year, mainly due to the decline in the gross profit margin of mobile phone products and international home information terminals. Among them, the operating income of household terminals increased by more than 80% year-on-year, and the operating income of mobile phone products increased by nearly 40% year-on-year.
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 2021, a new generation of off screen camera phone axon30 will be 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. In 2021, the annual shipments of the company’s terminals exceeded 100 million, the overall shipments increased by 60% year-on-year, and the market share of 5gcpe ranked first in the world.
Consolidate the first curve of core technologies such as chips, algorithms and network architecture, and actively promote the second curve of it, digital energy and smart home business. The company adheres to the leading technology, continues to increase investment in chips, algorithms, basic software and architecture, and accelerates the layout of new businesses while strengthening its core competitiveness. In terms of new business, the company accelerated its efforts in it business, digital energy business and smart home, promoting it to become a new engine for the company’s performance growth. Build a 10 billion level it business and focus on it products at the bottom; Integrate the software and hardware advantages of ICT technology, strengthen the expansion of automotive electronic business, and grasp the reform opportunities of intellectualization and networking in the automotive field; Set up special teams in mining, metallurgy and iron and steel industries to help the digital transformation of the industry with 5g application, it and big data. In the digital energy business, the company integrated and established the digital energy product business department, strengthened the operation of products such as power supply and IDC data center, and actively expanded the new energy business. In the smart home business, the company has set up a smart home product line, give full play to the advantages of existing home information terminal products, and vigorously expand consumer oriented home intelligent products.
In 2022, the capital expenditure of Chinese operators is expected to maintain a slight increase, and the industry prosperity is expected to maintain. 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 operators’ scale centralized procurement projects 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.
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 and the important role of the company in the field of digital economy. We maintain the net profit forecast of 7.7/8.4 billion yuan from 2022 to 2023, and the net profit in 2024 is expected to be 8.9 billion yuan, with the corresponding PE of 16x / 15x / 14x respectively, maintaining the “overweight” rating.
Risk tip: the peak of 5g construction fell, the price of industrial chain fell, and the capital expenditure of operators fell.
