ZTE (000063): Focus on core business and core market and wait for 5G capacity
Event: The company released its semi-annual report for 2019.
In the first half of 2019, the company achieved revenue of 446.
09 million yuan, an annual increase of 13.
12%; net profit attributable to mother 14.
7.1 billion yuan, an average of 78 in the same period last year.
At the same time, the company foresees a net profit of RMB 38 trillion to RMB 4.6 billion from January to September this year.
Key points of investment: Focus on core business, the carrier business gradually recovered in the first half of the year, and the operator’s network business realized revenue of 324.
$ 8.5 billion, an annual growth of 38.
19%; government and business income reached 4.7 billion yuan, a year-on-year increase of 6.
02%; consumer business realized income 74.
24ppm, 35 years average.
The company’s strategy of focusing on mainstream products has made 武汉夜网论坛 progress, and the operator’s network business has resumed rapid growth.
The increase in the proportion of operator business has driven the company’s product gross profit9.
Overseas business resumed growth in the first half of the year, the company achieved domestic revenue of 274.
2.1 billion, an annual increase of 6.
51%; the company’s overseas business realized revenue 171.
8.7 billion, an annual increase of 25.
ZTE’s overseas business gradually resumed after the U.S. embargo, with the Asian (excluding China) market growing for a decade.
16%, the African market grew by 111 in ten years.
Real-estate project confirmed gains in the first three quarters The company forecasts a net profit of US $ 3.8-4.6 billion in the first three quarters, mainly due to the company’s confirmation of the Shenzhen Bay Super Headquarters Base project in the third quarter.
According to the Air Force’s announcement, the Shenzhen Bay Super Headquarters Base project this year confirmed revenue of 2.6 billion cents to 2.9 billion US dollars.
Business cycle that continues to benefit operators’ 5G capital expansion The global communications equipment market has oligopoly characteristics, and the company is in the first echelon.
At the same time, communication equipment expansion accounted for the largest proportion in 5G capital expenditure.
The company regards 5G as its core strategy for development, and has the ability to complete 5G end-to-end solutions.
The company has won 25 5G commercial contracts around the world, covering major 5G markets such as China, Europe, Asia-Pacific, and the Middle East. It has started 5G cooperation with 60 operators worldwide. The company will continue to benefit from the global equipment boom cycle brought about by the expansion of 5G capital.
Estimates and investment recommendations We predict that the company will achieve net profit in 2019-2021.
55 yuan, 63.
7.3 billion, 80.
4.8 billion yuan, corresponding to an EPS of 1.
18 yuan, 1.
51 yuan, 1.
91 yuan, corresponding to the estimated 25X, 20X, 16X, optimistic about the incremental opportunities brought by the 5G capital expansion boom in the next five years to the communications equipment market.To measure market and industry change opportunities and give the company a “recommended” rating.
Risks suggest that operators’ 5G investment is less than expected; the distortion of Sino-US trade frictions has exceeded expectations.