ZTE (000063) 2019 Interim Report Review: Gross Margin Increases Beyond Expectations; 5G Driven Growth Accelerates in Second Half
Key Investment Events: ZTE’s Interim Report officially disclosed that it achieved operating income of 446 in the first half of 2019.
09 million yuan, an increase of 13 in ten years.
12%; comprehensive gross profit margin is 39.
21%, an increase of 8.
97 units; net profit attributable to mother 14.
710,000 yuan, always going up 118.
80%, and an increase of 58 from the second half of 2018.
At the same time, the net profit for the first nine months of 2019 is 38-46 trillion (including about 2 billion after-tax investment income).
Among the segment services, 1 operator’s network business revenue was 324.
850,000 yuan, an increase of 38 in ten years.
19%, gross margin increased by 3 in the short term.
49 up to 44.
The main reason for the business growth of this segment is that the company has further strengthened cooperation with mainstream international operators, FDD system equipment at home and abroad, and optical transmission products at home and abroad have grown significantly.
2 government business revenue 47.
00 billion, a slight increase of 6 a year.
02%, gross profit margin 36.
95%, an increase of 8 per year.
Among them, international data center products, international optical transmission products, and international FDD system equipment business have increased.
3 In the first half of the year, the terminal sales market was weak. At the same time, the company streamlined and standardized, and its consumer business revenue was 74.
24 ‰, significantly higher than expected, reaching 35.
In this way, the gross profit margin has increased by 8.
Ten averages reached 16.
The construction of 5G network scale started, and capital expansion accelerated.
As the first year of 5G, with the issuance of commercial licenses, construction has begun in various major regions across the country.
Judging from the recent statements of operators, the construction of 5G networks is likely to accelerate.
After China Mobile, China Unicom, and China Telecom successively stated that they will enable 50/40 cities to provide 5G services in 2019, China Mobile raised its 5G capital expansion to 24 billion (US $ 17 billion) at the press conference, confirming that we have gradually closed the cloud construction station.Forecast of volume increase.
We estimate that the total 5G construction volume of the three major operators in 2019 is 150,000 stations + (higher than the previous forecast of 100,000 stations), and the actual shipment may be higher.
In addition, 5G spending of US $ 40 billion in 2019 will be mainly released in the second half of the year. Therefore, we expect that the wireless side spending in 2019 will increase by 20% at the same time. Compared with the first half of the first half, there will be only a quarter-on-quarter increase in the second half.
From a global 5G perspective, substrate shipments have also grown rapidly.
As of the end of June, Huawei and ZTE have received 50 and 25 5G orders, respectively.
Driven by 5G construction in Europe, Asia Pacific, the Middle East and other regions, Huawei’s 5G base stations continue to be strong, reaching 150,000 stations at the end of June, and ZTE has also achieved 50,000 stations. It is expected that global 5G base station shipments in 2019 are expected to reach 1 million stations.
All of these have provided leading support for ZTE’s 2019 performance.
Driven by 5G investment applications, it has been carried out step by step.
In the 3G / 4G era, after the operator obtained the license, it took about two years to “get on the line” and entered the investment swap channel.
At the 5G stage, investment in communications will be a gradual process due to the effects of licensing rhythm, trade friction, and three major scenarios.
The most important reason is the logic of the new infrastructure of application-driven communication, because at this stage, 5G applications and business models are not clearly stated, requiring the coordinated development of networks, terminals, and applications, and continuous exploration.
We believe that 5G investment will spiral upward and the boom will continue for a long time. Therefore, ZTE has brought a relatively high window of prosperity to ZTE.
Focusing on the 5G main channel, the business capability has been rapidly improved.
At present, the company’s business level and technical strength are on the fast track of rapid development.
In terms of wireless, ZTE has launched 5G cooperation with more than 60 operators worldwide. Large-scale MIMO base stations have dispatched tens of thousands of units. NFV has more than 450 commercial and PoC cases worldwide. In the wired field, more than 30 5G bearer businesses have been completed.In the experiments of the local network and the existing network, the capacity and integration of 四川耍耍网 the flagship TITAN light receiver led the industry, and it has been applied on a large scale in China, Italy, Japan and other places. In terms of chips, all of the core communication chips have been self-developed, and more than 100 kinds have been successfully mass-produced.These include 10nm / 7nm process core communication chips, which are leading in terms of performance and have maintained a long-term leading edge; industry application areas, conducting “5G +” research exploration and demonstration in intelligent manufacturing, connected cars, new media, environmental protection, medical and other fieldsConstruction, business incubation, etc., help digital transformation of vertical industries.
Profit forecast: In 2019, ZTE and Vanke’s commissioned development of the Shenzhen Bay Super Headquarters Base will generate an investment income of about 2 billion after tax; in 2020, the volume of domestic and global 5G investment will drive the strong growth of ZTE’s main source of operator business, so weWe have raised our profit forecast and expect ZTE’s net profit for 2019-2021 to be 53.
800 million, 70.
100 million, 83.
400 million yuan, corresponding to the closing price and market value on August 27, 2019, PE was 23 times, 18 times, and 15 times, respectively, maintaining the “prudent increase” rating.
Risk reminders: Domestic equipment vendors are hindered from expanding overseas markets, and greater internal market competition; 5G network construction expansion is stronger than expected; trade wars are intensified or technology is blocked.