\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Event: on April 26, 2022, the company released the first quarter report of 2022. In 2022q1, the company achieved an operating revenue of 27.930 billion yuan, a year-on-year increase of 6.43%; The net profit attributable to the parent company was 2.217 billion yuan, a year-on-year increase of 1.60%; The net profit deducted from non parent company was 1.952 billion yuan, with a year-on-year increase of 117.13%.
The gross profit margin rebounded significantly, and the net profit deducted from non parent company increased rapidly. In 2022q1, the company achieved an operating revenue of 27.930 billion yuan, a year-on-year increase of 6.43%, and the three major businesses of operator network, government enterprises and consumers all achieved a year-on-year increase; The net profit deducted from non parent company was 1.952 billion yuan, with a year-on-year growth rate of 117.13%, which was mainly due to the development opportunities of “East data and West computing” project and 5g network construction. The company’s product R & D and market development made good progress and growth momentum was abundant. In 2022q1, the overall gross profit margin of the company was 37.78%, with a year-on-year increase of 2.34pct, which continued the recovery trend since 2021q1, mainly due to the recovery of centralized mining prices and the continuous improvement of business conditions. In the future, with the continuous optimization of operator network cost, the gradual easing of raw material cost pressure, the continuous increase of the proportion of self-developed chips and the further optimization of product structure, the gross profit margin of the company has room for further improvement. The return on net assets of 2022q1 company after deducting non recurring profits and losses was 3.71%, with a year-on-year increase of 1.94pct. The profitability of the company continued to improve, and the profit growth of the company in 2022 is expected.
The cost structure was optimized, the R & D cost rate was increased, and the three rates were well controlled. The company continued to strengthen R & D investment in key areas such as 5g, digitization and algorithms to consolidate its long-term competitiveness. In 2022q1, the R & D investment reached 4.698 billion yuan, a year-on-year increase of 12.07%, and the R & D expense rate was 16.82%, a year-on-year increase of 0.85pct. The leading R & D capability will build the cornerstone of the company’s long-term growth. In 2022q1, the company’s expense control ability was improved, the three rates decreased, the sales expense rate was 7.70%, a year-on-year decrease of 0.55pct, the management expense rate was 4.57%, a year-on-year decrease of 0.19pct, and the financial expense rate was 0.19%, a year-on-year decrease of 1.25pct.
2022 is the beginning year of the company’s strategic transcendence period. The company implements the strategy of “consolidating the foundation and expanding the new”, and the two curves are accompanied by development. On the one hand, we should continue to “consolidate the foundation”. For the first curve represented by traditional wireless and wired products, the company’s strategy is to make progress while maintaining stability. With the gradual expansion of 5g in the world and the further improvement of the core competitiveness of the company’s products, it is expected that the first curve business will maintain a stable growth of more than 10% and contribute to scale profits in the future. On the other hand, it is necessary to increase “innovation”. For the second curve represented by servers and storage, terminals, digital energy and automotive electronics, the company’s strategy is to develop rapidly. Among them, servers and storage products are expected to achieve rapid growth and contribute to scale increment, strive to maintain a high compound growth rate, become the company’s new 10 billion products within 1-2 years and enter the ranks of mainstream suppliers in China within 3 years. Seizing the opportunity of cloud network transformation of operators, the company positioned itself in “harmony and symbiosis” with cloud network transformation of operators, and customized servers, storage, available database alternatives, data center solutions, etc. for operators. In 2022, the company ranked among the top two in the multiple packages of centralized purchase of servers from China Telecom Corporation Limited(601728) 2022 to 2023, and seven packages in the centralized purchase project of PC servers from 2021 to 2022 of China Mobile, Ranked first in the “standard package I” of cloud server centralized purchase in 6 Lvjing Holding Co.Ltd(000502) 022, forming a strong support for the company’s performance growth.
Investment suggestion: the company is the leader of the main ICT equipment of Telecom. In 2022, the company entered the period of strategic transcendence, and the operation quality and efficiency continued to improve. The two curves developed together, accelerating the competitiveness of the company’s full range of ICT end-to-end products and digital solutions, and injecting stronger impetus into the high-quality growth of the company. 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
