ZTE (000063): Restructuring Focus Strategy with Good Business Development Momentum Has Effective Results
Investment 南京桑拿网 Highlights ZTE released the first quarter report for 2019 and achieved revenue of 222 during the period.
2 billion, a decline of 19 per year.
34%; net profit attributable to shareholders of listed companies8.
63 trillion, turned losses into profits, an increase of 115 in ten years.
At the same time, a semi-annual performance forecast for 2019 is issued, and it is estimated that the net profit attributable to shareholders of listed companies will be USD 1.2 to 1.8 billion, which will turn losses into profits and increase by 115.
Q1 performance was in line with expectations, and operating profit increased significantly.
Q1 Net profit attributable to shareholders of listed companies8.
6.3 billion yuan, within the expected range.
The main factors affecting performance include: the comprehensive gross profit margin is nearly 40%, which is significantly increased by nearly 12 percentage points each year; the sales expense ratio will decrease by 1.
19 pp; management expense rate increased by three in ten years.
31 pp; R & D expense ratio increased by 1 compared with 2018.
18 pp; financial expense ratio increased by ten years 2.
82 pp; the percentage of revenue from asset impairment losses decreased by 1.
9pp; other revenue revenue share decreased by 1.
3 pp; net investment income changed from negative to positive; net income from fair value changes increased by 1.
Taken together, Q1 operating profit decreased by 6.
59%, up 2 every year.
45 pp; Q1 operating profit 14.
64 ppm, an increase of 28 in ten years.
45%, irrespective of non-operating income and expenditure, the rapid growth compared with the same period last year, showing that the business has fully recovered and the development momentum is good.
The decline in the proportion of consumer business promoted the growth of gross profit margin, highlighting a breakthrough focus strategy.
Q1 gross profit margin was 39.
97%, an average increase of 7 from last year.
06 pp, the highest in the past five years, mainly due to the decline in the proportion of consumer business and reduced drag.
Focusing on the operator’s main channel and fully supporting 5G end-to-end commercial use, it was reset to the strategic focus of subsequent restructuring.
Inventories are basically the same as in the past two years, and the mobile phone business has fallen sharply.
The proportion of operators’ business will continue to grow with 5G investment, and the scale and gross profit level will be fully reflected, which will provide important support for the company’s future development. At the same time, the decline in the proportion of consumer business will not only reduce the drag on earnings, but also bring resources closer to the core.
Q1’s operating cash flow also improved significantly, and the company’s comprehensive management and overall business value improved.
The proportion of R & D expenses will increase, and the accumulated comprehensive competitiveness will be transformed into commercial value.
The company continued and strengthened its R & D and innovation efforts, with Q1 R & D expenses30.
93 ppm, an increase of 14 years.
39%, accounting for 13.
93%, at the expected high level.
It fully guarantees the company’s advantages in the core areas of 5G wireless, transmission, bearer, reception and chips.
With 40 large-scale operators around the world on the full 5G frequency band, a full-scenario coverage solution is gradually being opened, and a large amount of technology investment accumulated in the early stage is about to help ZTE realize the potential value realization in the 5G commercial stage.
At the beginning of 5G, relying on the occupied domestic market in the next three years, the company’s size and performance are expected to grow rapidly.
As the main contributor to global 5G technology and standard formulation, the company has deeply participated in global 5G cooperation and testing, accumulated patents and technologies, and it is a consensus that one of the top five global wireless main equipment competitiveness.
We believe that the domestic 5G market investment will account for more than half of the world ‘s total, while ZTE ‘s domestic market share is 30% to 40%, and local construction can support its global city share of 15% to 20%.
Coupled with the gradual focus, the overall gross profit level has improved significantly, and the company’s actual performance in the next few years is expected to exceed expectations.
Profit forecast and estimation: The new compliance framework is substantially different from the previous one. Under the background of the U.S.’s full commitment to supervision, the company’s violations may be extremely low. We believe that 北京夜网 the company has basically replaced the historical burden of export violations and is gaining momentum at a new starting point.Ready.
It is expected that the company’s net profit attributable to mothers will be 48 from 2019 to 2021.
04 billion, 60.
02 billion and 75.
17 trillion, the corresponding EPS is 1.
43 and 1.
Based on the top of the company and the 5G development space, the company will be given a price-earnings ratio of 30 times in 2020, with a target city size of 180 billion yuan, and maintain a buy rating.
Risk reminder events: Sino-US trade friction risk, operator input below expectations, customer credit risk, exchange rate risk, competition risk, technology risk.