\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Event overview: on April 25, 2022, the company released the first quarter report of 2022, realizing an operating revenue of 27.930 billion yuan, a year-on-year increase of 6.43%, a net profit attributable to the parent of 2.217 billion yuan, a year-on-year increase of 1.60%, and a net profit deducted from non attributable to the parent of 1.952 billion yuan, a year-on-year increase of 117.13%, which greatly exceeded the market expectation.
The revenue grew steadily, and the gross profit margin improved significantly month on month
22q1 company has achieved positive year-on-year growth in three major businesses and two markets. Among them, the consumer business continues to be large-scale, the overseas revenue of consumers has increased by nearly 30% year-on-year, and the growth of operators, government and enterprise businesses is relatively stable. The company's Q1 gross profit margin reached 37.78%, significantly improved (+ 2.34pct / + 6.84pct) on a month on month basis. Mainly due to the improvement of the recovery of the operator's gross profit margin in the Chinese market, we speculate that the normalization of centralized purchase price and the commercial use of self-developed chips have contributed. At the same time, it can also be seen that the rise in the price of raw materials has a limited impact on the company's gross profit margin, reflecting the company's high bargaining power on the upstream and downstream.
Strengthen cost control, increase R & D investment, and the growth rate of comparable profits is much higher than expected
The company strengthened the digital transformation of its internal operation and adopted Wuxi Online Offline Communication Information Technology Co.Ltd(300959) collaborative office in the face of the epidemic. The management efficiency was significantly improved, and the management expense rate decreased by 0.19pct to 4.57% year-on-year; The sales expense ratio decreased by 0.55pct to 7.70% year-on-year, and the scale effect was gradually reflected; The company continued to increase R & D investment and consolidate its core competitiveness. The R & D expense rate increased by 0.85pct to 16.82% year-on-year. Due to the sale of up to 90% equity of ZTE in 21q1, the non recurring investment income recognized in the current period was 816 million, while that in 22q1 was only 3.28 million. After excluding the impact, the growth rate of net profit attributable to parent company in 22q1 was 62.12%.
Looking forward to the future, consolidate the first curve and force the second curve, with clear strategic planning
In the past 22 years, there have been structural changes in the capital expenditure of Chinese operators to match the development of 5g market and the process of industrial digitization. Taking China Mobile as an example, it is estimated that the capital expenditure investment in 22 years will increase slightly by 0.9% to 185.2 billion, but the proportion of revenue of mobile communication network has decreased from 54.7% to 51.3%, while the capital expenditure for computing network and smart middle station has increased significantly. In this regard, the company takes the following measures to consolidate the first curve: 1) in the traditional network market of operators, the company continues to strengthen the competitiveness of product solutions. The main products in the Chinese market pursue more than 40% of the market share, and is committed to realizing the transformation from mainstream suppliers to core suppliers. The overseas market focuses on stability, focusing on efficiency improvement and compliance operation. 2) In the cloud network transformation market of operators, the company deeply combines its basic ICT equipment capability, software development capability and centralized procurement innovation capability with the cloud network transformation needs of operators, and provides customized products and solutions including servers and storage, chips, operating systems, video midrange, data centers and so on, so as to deeply embrace the digital economy. In the China Telecom Corporation Limited(601728) 20222023 server centralized purchase, the company ranked the top two in multiple bid packages, with a total bid winning amount of 3.438 billion yuan, providing strong support for performance growth. At the same time, the company chose the extension fields of the original CT business such as server and storage, terminal, 5g industry application, automotive electronics and digital energy as a breakthrough, accelerated the expansion, and successively established automotive electronics product line, smart home product line, digital energy operation Department and mining and metallurgical industry special teams, so as to fully adapt to the new business development mode of the second curve.
Investment suggestion: we are optimistic about the profit improvement brought by the increase of the company's gross profit margin and expense control, and look forward to the volume of the second curve. It is estimated that the net profit attributable to the parent company in 22-24 years will be 8.469 billion / 10.216 billion / 12.009 billion respectively, corresponding to 12 times / 10 times / 9 times of PE, and 29 times of the company's valuation center in recent five years. Maintain a "recommended" rating.
Risk tip: the capital expenditure of operators is less than expected, and the expansion of new business is less than expected.
