ZTE (000063): Operators, government and corporate affairs resume growth and pressure on cost ends continues


ZTE (000063): Operators, government and corporate affairs resume growth and pressure on cost ends continues

Event: Q2 2019 single quarter profit 6.

08 million yuan, after deducting land revenue, the company’s median value of 700 million yuan in the third quarter of 2019 achieved operating income of 446.

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

12%; net profit attributable to mother 14.

71 ppm, an increase of 118 in ten years.

8%; in a single quarter, the company’s Q2 2019 net profit attributable to the parent6.

08 thousand yuan.

According to the company’s announcement, the company is expected to realize net profit attributable to mothers in the first three quarters of 38-46 trillion, with a median value of 4.2 billion; in Q3 2019, it will achieve 23-31 trillion, a median of 27 trillion, of which land revenue is expected to be about 20 billion yuan, net ofThe median profit for the single quarter of Q3 2019 after land gain is around 7 trillion.

Overseas, government, enterprise and operator business resumed normal growth, consumer business continued to shrink, gross profit of the three major business segments rose, domestic and foreign FDD system equipment, internal optical transmission product substitution increased, driving operator business and overseas business revenue growth; consumptionThis business has continued to shrink due to the impact of the US ban.

The preliminary increase in the gross profit of the operator segment is believed to be mainly due to the FDD capacity expansion and upgrade.

Expenses for foreign compliance management are high, and long-term financial expenses are increased in the short term, which increases the company’s sales expenses in the first half of the year.

26 ppm, a ten-year average of 14.

9%, we think it is mainly caused by the contraction of overseas consumer business.

Administrative expenses 25.

US $ 3.9 billion, an increase of US $ 1.2 billion compared with the same period of the previous year, of which legal affairs costs increased by one-eight billionths compared with the same period of the previous year. The salaries and benefits of management staff increased by approximately 4 trillion compared with the same period of the previous year.The increase in wages of regulatory personnel and the increase in compliance costs of the company.

Finance costs 6.

630,000 yuan, an increase of 4 over the same period last year.

About 800 million, an increase of 261 in ten years.

5%, faster than revenue growth, mainly due to short-term growth and growth due to cash flow pressure after sanctions. In the first half of the year, the company’s short-term debt was US $ 34.6 billion, an increase of approximately 23.6 billion compared with the same period last year.

The increase in R & D investment in cutting-edge technology, the increase in contract assets and construction in progress, we look forward to increasing the company ‘s R & D expenses in the first half of the year.

72 trillion, an increase of about 14 trillion over the same period last year, and an annual increase of 27.

9%, mainly because the company continues to increase investment in 5G development,杭州桑拿 and pays close attention to self-research work on core devices and chips. Related amortization and depreciation and technical cooperation fees have increased rapidly.

Contract assets were around 10.5 billion, an increase of around 4.7 billion a year.

Construction in progress 22.

7 ‰, a year-on-year increase of about 4 ‰, an annual increase of 23%, mainly due to the accelerated investment in the first phase of Nanjing Intelligent Manufacturing Base.

Profit forecast and estimation As one of the leading domestic equipment manufacturers, we expect ZTE’s net profit to reach 5 billion yuan in 2019-2021,58.

40,000 yuan, 73.

3 ppm, corresponding to the current price of PE 25x, 21x, 17x. Considering that the internal 5G construction has entered the deployment stage, it is estimated to fall to normal levels and give a “neutral” rating.

Risk warnings: Sino-US trade disputes affect overseas orders; additional issuance of short-term short-term cash flow risks; 5G commercial progress is less than expected; systemic risks.