\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Event: on March 8, 2022, the company issued its annual report for 2021. In 2021, the company achieved an operating revenue of 114.52 billion yuan, a year-on-year increase of 12.9%; The net profit attributable to the parent company was 6.81 billion yuan, a year-on-year increase of 59.9%; The net profit deducted from non parent company was RMB 3.31 billion, with a year-on-year increase of 219.2%.
The growth of revenue and gross profit margin accelerated, and the quality of operation continued to improve. In 2021, the company’s revenue has achieved year-on-year growth in China / international market and three business lines. By region, the revenue in the Chinese market was 78.07 billion yuan, a year-on-year increase of 14.7%, and the revenue in the international market was 36.45 billion yuan, a year-on-year increase of 9.1%. In terms of business, the operator network achieved a revenue of 75.71 billion yuan, a year-on-year increase of 2.3%, mainly due to the contribution of 5g wireless, servers and other products; Government and enterprise business achieved a revenue of 13.08 billion yuan, a year-on-year increase of 16.0%, mainly due to the contribution of servers and other products; Consumer business achieved a revenue of 25.73 billion yuan, a year-on-year increase of 59.2%, mainly due to the contribution of mobile phones, home information terminals and other products. In 2021, the overall gross profit margin of the company was 35.24%, with a year-on-year increase of 3.63%, mainly due to the increase of network gross profit margin of operators. In the future, with the continuous optimization of the operator network, the gradual easing of the pressure on the cost of raw materials and the further optimization of the product structure, the company’s gross profit margin is expected to increase steadily.
Deeply participated in the global 5g scale construction, and the market pattern and share of operators have increased. According to mtnconsulting, in 2021q3 global telecom infrastructure market share, the company ranks fourth, and the global market share of operator business continues to rise. 1) In terms of wireless products, the company actively participates in the global 5g construction and is the leader in the global wireless access network equipment market. According to omedia data, as of 2021q3, the company’s 5g base station delivery volume has remained the second in the world, and the global revenue of 5g core network has ranked the second. 2) In terms of wired products, 5g carries the large-scale deployment of a full range of end-to-end products, and the optical network operator market continues to lead. According to omedia data, as of 2021q3, the company’s optical network revenue operator market share ranks second in the world, and the end-to-end fiber to home FTTP solution continues to maintain the highest “leader” rating of GlobalData. China Mobile Core Router won the bid in 2021. The core server won the bid for centralized server purchase of three major operators, and won the bid for seven packages in the centralized PC server purchase project of China Mobile from 2021 to 2022; With a bid winning amount of 3.438 billion yuan, it ranks first in the centralized server purchase project of China Telecom Corporation Limited(601728) 20212022; With a bid winning amount of 2.428 billion yuan, it ranked first in the bidding package of cloud server centralized procurement project in 6 Lvjing Holding Co.Ltd(000502) 022.
Continue to strengthen the expansion in government enterprises, consumers and new business areas, and actively create the second growth curve of the company. The company’s government and enterprise business focuses on energy, finance, Internet, transportation, large enterprises and other fields. At present, it has reserved a series of products such as financial database, full module data center, server and storage, data communication equipment and so on. In 2021, the government and enterprise revenue increased by 16.0% year-on-year, of which the server revenue increased by more than 70% year-on-year. The company’s consumer business has gradually integrated mobile phones, broadband Internet, terminal chip modules and ecological capabilities to form a “big terminal” and create a full scene smart ecosystem. In 2021, the consumer business revenue increased by 59.2% year-on-year. In addition, the company accelerated the development of it, digital energy, terminal business and other emerging businesses. In terms of it, the company focused on building the underlying competitiveness of IT hardware such as servers and quickly creating new 10 billion products; Integrate the advantages of ICT technology software and hardware to strengthen the expansion of automotive electronics business. In terms of digital energy, the company integrated and established a digital energy product business department, strengthened the operation of products such as power supply and IDC data center, and actively expanded new energy business. In terms of terminal business, the company will focus on personal and family terminals, continuously expand peripheral products, build a “1 + 2 + n” strategic ecology, promote the transformation and evolution of “hardware software service ecology”, and form a whole scene intelligent ecology.
The company continued to strengthen R & D investment in key areas such as 5g, digitization and algorithms to strengthen its core competitiveness. In 2021, the company’s R & D expenses reached 18.804 billion yuan, a new high in recent five years, with a year-on-year increase of 27.08%, and the R & D expense rate reached a high of 16.42% in recent five years. In terms of patents, the company ranks first in the global patent layout and is a major contributor and participant in global 5g technology research and standard setting. By the end of 2021, the company had about 84000 global patent applications and 42000 global authorized patents over the years. The accumulation of patents and other intellectual property rights of the company has laid the foundation for patent monetization and operation mode. According to iplytics data, as of November 2021, the company disclosed 5g standard necessary patent declarations to ETSI, ranking the fourth in the world.
Investment suggestion: as the leader of Telecom ICT main equipment, the company has continuously improved the business market pattern of operators, made efforts to “new three kinds” of government and enterprise business, multi-point layout meta universe, and its performance is expected to continue to improve. We expect that the company’s revenue from 2022 to 2024 will be 131.4 billion yuan / 150.19 billion yuan / 170.78 billion yuan respectively, and the net profit will be 84.0/102.9/11.79 billion yuan respectively, corresponding to eps1.5 billion yuan 78 / 2.17 / 2.49 yuan, with outstanding growth; Give 16 times PE in 2023, corresponding to the 12-month target price of 34.72 yuan, and maintain the investment rating of buy-a.
Risk tips: RMB exchange risk, overseas business growth caused by the epidemic is less than expected, the risk of aggravating Sino US trade friction, the risk of business not meeting expectations, and the risk of overseas litigation
