\u3000\u300 Shenzhen Zhenye(Group)Co.Ltd(000006) 3 Zte Corporation(000063) )
Company announcement: the company announced the first quarterly report of 2022, during which the operating revenue reached 27.93 billion yuan, a year-on-year increase of 6.4%; The net profit attributable to ordinary shareholders of listed companies was 2.22 billion yuan, a year-on-year increase of 1.6%; The net profit attributable to ordinary shareholders of listed companies after deducting non recurring profits and losses was 1.95 billion yuan, a year-on-year increase of 117.1%; The basic earnings per share is 47.0 yuan.
Q1 deduction of non parent net profit increased rapidly and profitability continued to improve. In 2022, the company entered the surpassing period strategically and set the goal of entering the global top 500 within 2-3 years. In the first quarter, the company continued to practice its own positioning as a “road builder of digital economy”, grasped the opportunity of digital transformation, deeply focused on ICT infrastructure and “big terminal” products, and continuously improved the company’s operation quality and efficiency. In China’s two international markets, the operating revenue of the three major businesses of operator networks, government enterprises and consumers achieved year-on-year growth. The consumer business continued its high growth trend, in which the operating revenue in overseas markets increased by nearly 30% year-on-year. In terms of gross profit margin, the cost optimization continued to improve. In 2022q1, the company’s sales gross profit margin reached 37.78%, up 2.34 PCT year-on-year and 6.84 PCT month on month. In terms of expense rate, the company’s sales / management / financial expense rate in the first quarter was 7.7% / 4.57% / 0.19% respectively, with a year-on-year increase of + 0.07 / – 0.19 / – 0.65 PCT respectively. In terms of asset structure, the company’s monetary capital reached 59.216 billion yuan, a record high. The company’s business flourishes at many points. On the one hand, it consolidates the advantages of the first curve business represented by traditional wireless and wired products, on the other hand, it quickly improves the second curve business capacity represented by servers and storage, terminals, digital energy, automotive electronics, etc., so as to serve the development of global digital economy.
Grasp the opportunity of cloud network transformation of operators and strengthen the service capacity in overseas markets. The company strengthens the business capability advantages of operators. In the traditional network market, the company will continue to strengthen the competitiveness of product solutions in terms of performance, efficiency, intelligence, low-carbon and security, consolidate and improve the existing pattern, and strive to realize the transformation from mainstream suppliers to core suppliers. In the cloud network transformation market, the company deeply combines its basic ICT equipment capability, software development capability and integrated innovation capability with the cloud network transformation needs of operators, makes efforts at the key points of cloud network integration and computing network integration, and provides appropriate products and solutions, including servers and storage, chips, operating systems, video midrange, data centers, etc, And the customization network of more industries and the customization ability of industrial business domain. In February 2022, the company ranked the top two among the multiple standard packages of centralized server procurement from China Telecom Corporation Limited(601728) 2022 to 2023, and ranked the first among the “standard package 1” of centralized server procurement from China United Network Communications Limited(600050) cloud servers. The company adheres to the globalization strategy and focuses on improving efficiency. With the end of the US compliance observation period, overseas business is expected to gradually pick up. On the one hand, the epidemic has delayed overseas wireless capital expenditure and there is a large market space for overseas 5g development. On the other hand, the company’s products play a model role in China’s 5g construction and enhance its global competitiveness and influence.
Maintain high R & D investment and actively develop the second growth curve. The company consolidated its core technical strength, and its R & D investment reached 4.7 billion yuan in 2022q1, accounting for 16.8% of its operating revenue. On the basis of maintaining the business growth of the first growth curve, the company closely follows the development trends of new infrastructure, East digital West computing, carbon peak carbon neutralization and so on, constructs the “connection + computing power” capability, and arranges the second curve business including server and storage, terminal, digital energy, automotive electronics and so on. By extending its ICT technology capability, the company strengthens cooperation with leading enterprises in the industry, actively promotes industrial digital application and practice, and enables the transformation and upgrading of digital intelligence in thousands of industries. Among them, servers and storage have gained a good share in recent important centralized purchase projects and achieved rapid business growth. The company aims to build servers and storage into new 10 billion products within 1-2 years and enter the ranks of mainstream suppliers in China within 3 years. In terms of consumer business, the company focused on “product + brand + channel”. In 2021, the revenue of mobile phone products increased by nearly 40% year-on-year. At the same time, we will promote the construction of offline channels in China. More than 6000 channels will be built by the end of 2021, and it is expected to reach 10000 by 2022, promoting the mobile phone business to become the revenue growth point of the company.
Investment suggestion: the company is the leader of ICT in China, focusing on continuous business restructuring, deepening competitive advantage, actively responding to industrial trends and exploring new markets. The company strengthened cost control and continuously improved its profitability. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 8.719 billion, RMB 10.062 billion and RMB 11.331 billion respectively, corresponding to EPS of RMB 1.84, RMB 2.13 and RMB 2.39 respectively, maintaining the buy rating.
Risk warning: Sino US trade risk, operator investment less than expected risk, customer credit risk, exchange rate risk, competition risk and technology risk
