Zte Corporation(000063) (000063)
The company’s fundamentals continued to improve: in 2021q1-q3, the company achieved a revenue of 83.825 billion yuan, a year-on-year increase of 13.08%; The net profit attributable to the parent company was 5.853 billion yuan, a year-on-year increase of 115.81%; The net operating cash flow increased to 11.171 billion yuan, reaching the highest value in recent five years, with a year-on-year increase of 188.7%, and the net cash ratio remained above 120% for five consecutive years; The R & D cost was 14.171 billion yuan, and the R & D cost rate reached a high of 16.9% in recent five years; Benefiting from the recovery of centralized mining prices and the improvement of operating conditions, the gross profit margin rebounded to 36.8%, approaching the highest level in recent 20 years.
The market structure of operators has improved and the market share has continued to increase: according to dell’orogroup, ZTE accounted for 10.5% of the global telecom infrastructure market share in the first half of 2021, up 0.4% compared with 2020, reaching the highest level in history, and the global market share of the company’s operator business has continued to rise. 1) On the wireless network equipment side, in the Chinese market: according to the operator’s announcement, the company won 31.0% of the bid in the centralized procurement of 5g700m wireless network main equipment of China Mobile on July 18, 2021, and 39.34% of the bid in the procurement of 2.1g wireless network main equipment of China Unicom in July 2021, In the international market, according to dell’orogroup, the market share of 5g base station equipment has risen to 11% in 2020; 2) On the side of wired network equipment, ovum’s market share ranks fourth in the world, reaching 12.9% in Q1 in 2021.
The b-end business is expected to open the second growth curve: “emerging” business takes over the “old three”. The company’s government and enterprise business originally focused on the traditional advantageous products in the wireless, transmission and conference television operator markets. In the future, the company will focus on high-performance servers, distributed databases, new data centers, end-to-end digital transformation solutions and industry modules that help new infrastructure High Performance Switches, transmission and other fields continue to make efforts. 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. According to the company’s announcement, from January to September 2021, China’s government and enterprise revenue increased by more than 60% year-on-year, of which the server revenue doubled year-on-year. In terms of automobile, the company goes hand in hand with wireless charging, 5g-v2x and on-board operating system, and cooperates with vehicle enterprises. In July 2021, FAW and the company signed a deepening strategic cooperation agreement in Changchun to strengthen cooperation in core technology, chip field, basic software and 5g application scenarios. In August 2021, the company signed a cooperation agreement with Saic Motor Corporation Limited(600104) . The two sides will strengthen strategic collaborative innovation cooperation in vehicle basic software technology, basic hardware platform, cloud computing, intelligent networking, etc. the company will also continue to promote cooperation with SAIC zero beam, Lianchuang Electronic Technology Co.Ltd(002036) and other companies.
Multipoint layout yuancosmos: Zte Corporation(000063) has been deeply cultivated in the ICT field for 36 years, with global technology accumulation and innovation. On March 17, 2020, Zte Corporation(000063) joined hands with CRRC digital and Nanjing mobile to apply 5gxr products to train manufacturing and successfully put them into practice, marking that the company’s 5g cloud XR platform ZTE xrexplore has practical commercial capability. On January 12, 2021, the company joined hands with relevant units in the press conference of “a mobile phone to travel to Hubei”, and the Phoenix symbolizing Chu culture was integrated with the virtual and real scenes in the studio through MR technology. The digital visual impact and immersive experience made the company’s XR series platforms and products shine successfully in the media industry. Relying on the technology moat built by the company in the field of science and technology communication ICT for many years, its products are leading the industry in many aspects.
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 the company’s revenue to be 115.18/132.45/151.76 billion yuan and net profit to be 68.7/84.4/11.14 billion yuan respectively from 2021 to 2023, with outstanding growth; Give 25 times PE in 2022, corresponding to the 12-month target price of 44.50 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, Sino US trade friction intensifies, and business does not meet expectations
