20210617-招银国际-中兴通讯-00763.HK-CMBI_Tech_Corporate_Day_takeaways_6页_1mb

报告摘要

ZTE (763 HK) - CMB International Securities Equity Research Summary

Core Content

CMB International Securities has issued a positive update on ZTE, reiterating a BUY rating with a target price of HK$28.1, which represents a 24.5% upside from the current price of HK$22.6. The analysis is based on ZTE's strong position in the global 5G deployment and industry consolidation, as well as its growing opportunities in domestic government and enterprise markets.

Key Highlights

1. China 5G BTS Tender Progress

The third batch of China 5G BTS tenders is currently in progress, with the first two tranches already deployed:
- 2.6GHz: 120k units by China Mobile (CM)
- 3.5GHz/2.1GHz: 320k units by China Unicom (CU) and China Telecom (CT)
A second tranche of ~400k 700MHz is expected to be deployed over a 2-year plan, with details likely to be released in 2H21E.
ZTE's share allocation in the 3rd batch is expected to be similar to that of 4G/5G BTS in each city, which is favorable as 5G deployment expands to Tier 3/4 cities where ZTE has a stronger presence.

2. Domestic Government & Enterprise Business

Management expects significant growth in domestic government and enterprise markets with a 50% CAGR from FY21 to FY23E.
Key drivers include:
- Accelerated digital transformation due to the impact of COVID-19
- Growing localization needs
- Technology leadership supported by ZTE's ICT capabilities

3. Operational Improvements

Gross Margin (GPM) improved to 35.4% in 1Q21, up from 31.6% in FY20, driven by the adoption of self-developed chips in 2H20.
ZTE's BTS has seen:
- 30% reduction in size
- 30% reduction in power consumption
- 30% improvement in performance
- 20-30% cost optimization

4. Financial Performance (FY19A - FY23E)

Metric	FY19A	FY20A	FY21E	FY22E	FY23E
Revenue (RMB mn)	90,737	101,451	116,995	129,070	140,524
YoY Growth (%)	6.1%	11.8%	15.3%	10.3%	8.9%
Net Profit (RMB mn)	5,148	4,260	6,181	7,097	8,903
EPS (RMB)	1.22	0.92	1.34	1.54	1.93
YoY Growth (%)	NA	-24.8%	45.6%	14.8%	25.4%
PE (x)	15.3	20.3	14.0	12.2	9.7
PB (x)	2.3	2.0	1.8	1.6	1.4
Yield (%)	0.8	0.8	1.1	1.3	1.6
ROE (%)	19.9	11.8	13.5	13.9	15.6

5. Market Share & Industry Position

ZTE is ranked No. 4 globally in the telecom equipment vendor market (1Q14-1Q21).
In 2020, ZTE secured 31% market share in the China 5G BTS tender, ranking No. 2.

6. Valuation and Outlook

The target price is based on a 17.4x FY21E P/E, which is in-line with the 2-year historical forward P/E.
ZTE is currently trading at 14.0x FY21E P/E, 1 SD below the 2-year average, making it attractive.
2H21E outlook is positive due to potential share gain in the 3rd batch 5G tender.
Upcoming catalysts include the release of China 5G BTS tender details and global share gain.

Key Figures

12-Month Price Performance

1-month: 21.0%
3-month: 17.4%
6-month: 24.1%

Shareholding Structure

BlackRock: 5.91%
Capital Group: 5.08%
Schroders: 4.93%

Revenue Breakdown

Segment	FY19A (RMB mn)	FY20A (RMB mn)	FY21E (RMB mn)	FY22E (RMB mn)	FY23E (RMB mn)
Carriers' network	66,584	74,018	85,824	94,098	101,469
Consumer business	14,997	16,160	17,166	18,431	19,935
Gov. and enterprise	9,155	11,272	14,006	16,541	19,120

Conclusion

ZTE is positioned to benefit from global 5G deployment and industry consolidation, with positive outlook and growth opportunities in both domestic and overseas markets. The company is showing improving financial metrics, including higher GPM and revenue growth. The BUY rating and target price reflect confidence in its future performance and potential for value appreciation.