Core view
Interpretation of the 2021 annual report of Huawei, the leading enterprise of 5g main equipment: the scale of revenue has been reduced, and the profitability and cash flow acquisition ability have been greatly improved. Affected by various factors such as the supply shortage and epidemic situation in the upstream of the industrial chain caused by US sanctions, the company’s revenue in 2021 was 636.8 billion yuan (- 28.6%, YoY); Due to the income from the sale of glory, the improvement of operating quality and the optimization of product structure, the company’s net profit was 113.7 billion yuan (+ 75.9%, YoY) and operating cash flow was 59.7 billion yuan (+ 69.4%, YoY), both of which achieved growth. Among them, the distribution of operator business / consumer business / enterprise business realized a revenue of 281.5 billion yuan / 243.4 billion yuan / 10.4 billion yuan, a year-on-year change of – 7.0% / – 49.6% / + 2.1%. In 2021, the United States imposed several rounds of severe sanctions on Huawei, which greatly affected Huawei’s consumer business, especially its mobile phone business, and Huawei’s mobile phone fell out of the top five in the world.
5g + digital ecology blossoms at multiple points, and Huawei is an enabling industrial chain partner. (1) 5g network construction: Huawei, Zte Corporation(000063) and other major equipment companies actively participate in 5g network construction, continuously develop 5g industry applications, and help operators provide reliable ICT infrastructure base for Industry digitization through technology integration. By the end of 2021, Huawei had signed more than 3000 commercial contracts for 5g industry applications. (2) Ecological construction: with the development of the Internet of things, “technology + demand” drives the accelerated integration of ICT ecology. Huawei focuses on building Euler, Shengsi and Hongmeng ecology, based on the underlying services, through opening and open source, and promoting computing power and data flow, so as to lay the foundation for the interconnected computing network of all things. (3) Enterprise digital transformation: relying on the technical advantages of ICT infrastructure of end management cloud, Huawei has accelerated the digital transformation of the industry, injected new momentum into the digital economy, and released 11 landscape solutions for key industries such as government, transportation and finance.
Accelerate the implementation of the intelligent networked automobile industry. The Internet of vehicles is a rapidly developing branch of the Internet of things. Huawei grasps the long-term strategic opportunity of the smart car parts business. At present, it has listed more than 30 smart car parts, and provides smart car solutions for BAIC, Chang’an and other auto enterprises through hi (Huawei inside) and smart selection mode. Under the guidance of Huawei, the intelligent auto parts industry is expected to quickly form a unified system and ecology.
Investment proposal and investment object
With the continuous expansion of 5g downstream application scenarios and the transformation and upgrading of industry digitization, we maintain the “optimistic” rating of the communication industry. It is recommended to pay attention to the A-share operator China Mobile (600941, Unrated), China Telecom Corporation Limited(601728) ( China Telecom Corporation Limited(601728) , Unrated), China United Network Communications Limited(600050) ( China United Network Communications Limited(600050) , Unrated), Hong Kong stock operator China Mobile (00941, Unrated), China Telecom Corporation Limited(601728) (00728, Unrated), China United Network Communications Limited(600050) (00762, Unrated); As well as the 5g main equipment supplier Zte Corporation(000063) ( Zte Corporation(000063) , buy) with improved competition pattern and increased performance.
Risk tips
The progress of 5g popularization was lower than expected, and China US trade relations deteriorated
