\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Event: Zte Corporation(000063) released the first quarterly report of 2022, realizing operating revenue of 27.930 billion yuan, yoy + 6.43%, net profit attributable to parent company of 2.217 billion yuan, yoy + 1.6%, net profit attributable to parent company of 1.952 billion yuan after deduction, yoy + 117.13%, the performance is in line with our expectations.
After deduction, the net profit returned to the parent company increased rapidly, and the gross profit margin improved significantly: from the perspective of revenue, the operating revenue of the two major markets of China and the world, the three major businesses of operators' networks, government enterprises and consumers, increased year-on-year, and the overall business revenue increased steadily; Among them, the consumer business showed a continuous and large-scale trend, and the operating revenue of the overseas market of the consumer business increased by nearly 30% year-on-year. With the improvement of product structure, the gross profit margin driven by the operator's business continued to rise. In Q1 2022, the gross profit margin was 37.78%, 2.34pp higher than Q1 2021 (35.44%) and 6.84pp higher than 2020q4 (30.94%). In terms of net interest rate, Q1 in 2022 achieved a net interest rate of 7.28%, a decrease of 0.66pp compared with Q1 in 2021 (7.94%), an increase of 4.53pp compared with 2020q4 (2.75%), and a significant increase in profitability. In 2022, Q1 achieved a net profit of 1.952 billion yuan, yoy + 117.13%, which increased significantly. The recognition of non recurring profit and loss items shall be carried out in accordance with relevant regulations. The non recurring profit and loss items listed in the regulations are defined as recurring profit and loss, with a total amount of about 343 million yuan.
The effect of cost control is good, continuously increasing R & D investment and consolidating technical advantages: from the cost side, the sales cost is 2.152 billion yuan, a year-on-year decrease of 0.64%, a month on month decrease of 6.49%, and the sales cost rate is 7.70%, a decrease of 0.55pp compared with 2021q1; Administrative expenses incurred amounted to RMB 1.276 billion, with a year-on-year increase of 2.21%, a month on month decrease of 6.55%, and the rate of administrative expenses was 4.57%, a decrease of 0.19pp compared with 2021q1; Financial expenses incurred amounted to 53 million yuan, down 85.98% year-on-year and 69.14% month on month. From the expense side, various expenses are well controlled, which continuously contributes to the steady improvement of profitability. In terms of R & D investment, the R & D expenses incurred in Q1 in 2021 were 4.698 billion yuan, with a year-on-year increase of 12.07% and a month on month increase of 1.41%, accounting for 16.82% of operating revenue. Zte Corporation(000063) continued to increase R & D investment and consolidate core technical competitiveness.
Pay close attention to the wave of industrial digitization and enable the intelligent transformation and upgrading of the industry: build the "connection + computing power" capability, force the "second curve" layout of servers and storage, terminals, digital energy, automotive electronics and other businesses, strengthen cooperation with leading enterprises in the industry, actively promote the application and practice of industrial digitization, and enable the transformation and upgrading of thousands of industries and hundreds of industries.
Profit forecast and investment rating: according to the latest industry demand, we lowered the performance expectation. We lowered the net profit attributable to the parent company from RMB 8.191 billion, RMB 9.950 billion and RMB 12.260 billion in 20222024 to RMB 8.175 billion, RMB 9.621 billion and RMB 10.944 billion respectively, with EPS of RMB 1.73, RMB 2.03 and RMB 2.31 respectively, and the corresponding PE valuation is 13X / 11x / 9x respectively. We continue to be optimistic about the stable growth of Zte Corporation(000063) future performance and maintain the "buy" rating.
Risk warning: the demand of operators is less than expected; The business development of government and enterprises is less than expected; Increased trade friction
