ZTE (000063) Quarterly Report Review: Focus on 5G gross profit of operators to rapidly increase R & D and continue to strengthen
Event: On April 29, the company announced that its total operating income for the first quarter of 2019 was 222.
2 billion, a decline of 19 per year.
34%; net profit attributable to mother 8.
6.3 billion, an increase of 115 in ten years.
95%; deduct non-attributed net profit1.
3.3 billion, an annual increase of 572.
At the same time, the company announced the 2019 semi-annual performance forecast, and the net profit attributable to the mother in the first half of the year is expected to be 12?
Q1 gross profit margin rose to 39.
97%, reaching the highest point in the 3G / 4G ten-year cycle: due to the decline in the proportion of consumer business revenues due to lower gross profit margins, the company’s Q1 operating costs fell by 32.
75%, the overall gross profit margin increased by 11 in the short term.
9 pcts, which is an increase of 5 from the previous month.
7 pct, and reached the highest point in 10 years since the 3G and 4G cycles.
In the future, if the company continues to focus on 5G operator business and effectively control consumer business losses, future profitability will help maintain a high level.
Looking at the horizontal comparison, Ericsson’s gross profit margin for sales in Q1 2019 was 38.
40% of Nokia’s sales gross margin was 31.
40% proves that ZTE’s main business profitability is ahead of European manufacturers. If ZTE returns to overseas markets in the 5G era, it will also be expected to achieve better performance.
The net profit after deducting non-attribution is low, which is mainly affected by the excessively high non-recurring profit and loss in this period.
2018) quarterly non-recurring profit and loss are all 1.
400 million range.
Non-recurring gains and losses for the period are included in 7.
3 billion, its main composition is non-operating income + other income5.
7.3 billion (among which, other income 2).
0.4 billion from software product tax rebates), fair value gains and losses3.
4.1 billion (increased by the market value of equity of other listed companies held by ZTE Venture Capital) and investment income (65.97 million) (income generated by the rise of the market value of equity of other listed companies held by ZTE Venture Capital).
Affected by the US sanctions incident, management costs and financial costs increased significantly: Due to the increase in legal affairs and personnel costs in the current period, Q1 management costs increased by 93%, reaching 12.
6.1 billion; due to the increase of indicators such as the 1.4 billion US dollar budget and the increase in exchange losses caused by exchange rate changes, Q1’s financial expenses can surge by 317% to reach 7.
The total of 19Q1 management expenses and financial expenses increased by about 1.2 billion compared with the normal level of 2018Q1.
If the simple reduction is carried out according to comparable calibers, the net profit attributable to the mother in 2019Q1 may increase by hundreds of millions.
R & D expenses increased by 14%, and net cash flow from operations returned to positive: Q1 R & D expenses increased by 14% to 30.
As of now, the company has accumulatively applied for more than 3,500 5G patents, and 南京龙凤网 made 5G calls with major global operators such as France Telecom, China Telecom / China Unicom / Mobile.
Q1 Operating cash flow 12.
60 billion, a continuous increase from the fourth quarter of 2018, and the profit content of gold has continued to increase.
The semi-annual performance forecast is low: According to the semi-annual performance forecast, the net profit attributable to the mother is 12?
1.8 billion, Q2 single-quarter net profit attributable to mother is 3.
4 billion, a net increase of -60% from the previous quarter?
This situation may be similar to 2017Q3, which was due to the sale of Nubia10 in 2017Q3.
After the 1% equity was included in the investment income, although the endogenous part of the company’s single-quarter results in the third quarter of 2017 was almost invisible, it once caused market doubts.New advantages in the development of 5G markets.
Investment advice: We expect the company in 2019?
Income in 2021 will be 1021.
8.9 billion (+19.
7.5 billion (+20.
3.2 billion (+18.
2%), the net profit attributable to shareholders of the listed company is 50.
07 billion, 66.
6.2 billion (+33.
2.4 billion (+20.
4%), corresponding EPS is 1.
19 yuan, 1.
58 yuan, 1.
90 yuan, corresponding PE is 28 times, 21 times, 18 times.
Continue to be optimistic about the company’s medium and long-term investment value as the core target of 5G main equipment, and raise the target price to 39.
50 yuan, maintain “Buy-A” investment rating.