ZTE (000063): Continuous improvement in performance and 5G construction meet major opportunities

ZTE (000063): Continuous improvement in performance and 5G construction meet major opportunities

The main business resumed with stable and better performance.

The company’s total operating income for H1 in 2019 was 446.

09 million yuan, an increase of 13 in ten years.

12%; Realize net profit attributable to shareholders of listed companies.

71 ppm, an increase of 118 in ten years.

80%, the basic profit return is 0.

The 35 yuan is mainly due to the increase in the operating income of government and corporate affairs over the same period last year.

The company estimates that the first three quarters of net profit will be 3.8-4.6 billion, an annual increase of 152% -163%.

Continue to focus on the main business and develop steadily.

Operator network, government affairs, and consumer business continued to develop. The company’s H1 operator network operating income in 2019 was 324.

8.5 billion, an annual increase of 38.

19%, gross margin increased to 44.

73%, mainly due to the internal FDD system equipment and internal optical transmission products operating income and growth; government and corporate business operating income of 4.7 billion, an increase of 6.

02%, gross profit margin increased to 36.

95%, mainly due to the increase in operating income of international data center products, international optical transmission products, and international FDD system equipment.

Consumer business income 74.

2 billion, 35 from the previous decade.

41%, gross profit margin increased to 16.

48%.

Improve the layout at home and abroad and increase investment in research and development.

2019H1 company’s domestic market realized operating income of 274.

2.2 billion yuan, accounting for 61% of revenue.

47%.

Focus on key projects, improve customer satisfaction, maintain stable 4G market share and network layout, and at the same time do a good job of 5G layout, seize the opportunity of technological change through long-term technology accumulation and product competitiveness; the international market achieved operating income of 171.

8.7 billion yuan, accounting for 38% of revenue.

53%.

Adhere to the formulation of strategies, continue to focus on the telecommunications operator market, focus on high-quality core customers, and consolidate the existing market, strengthen 5G cooperation with mainstream operators, and continue to strengthen the breakthrough and layout of core products.

R & D expenses for the first half of the year 64.

700 million, an annual increase of 27.

89%, found R & D and investment in chips. At present, all 深圳spa会所 core communication chips are self-developed, and more than 100 types of chips have been gradually developed and successfully mass-produced, covering wireless network access, fixed network access, bearer, terminal and other fields.

Profit forecast and investment recommendations: Taking into account the company’s business recovery and investment income, the company’s profit forecast is raised. It is estimated that the net profit attributable to the mother for 2019-2021 will be 51.

2 billion, 6.3 billion, 79.

30,000 yuan, the current sustainable corresponding dynamic PE is 24 times, 19 times and 15 times, maintaining the “Buy” rating.

Risk warning: 5G is not progressing as expected; trade war risks.