ZTE (000063): New starting point for 5G network innovation highlights long-term value of main equipment
The major countries are focusing on 5G technology, and external pressure will gradually promote the acceleration of domestic network construction. It is expected to replicate the 4G rhythm and rapidly expand capital. In 3 to 5 years, the world ‘s largest 5G network with the best technology and the best experience will be built.
As the world’s leading main equipment leader, ZTE is bound to bear the burden, and in this way leverage the upstream core to make further 杭州桑拿 breakthroughs, opening up a new situation in fixed network and government and corporate affairs.
The starting point for 5G network innovation is ZTE.
The company’s core business returned to normal, and the momentum is generally improving.
Although it experienced ups and downs last year, through the improvement and implementation of the compliance system, ZTE has fully cut off the historical burden and its core business has quickly entered the right track.
Since the third quarter of last year, the company’s business scale has recovered more than expected. At the end of 2018, the scale of business operations of operators and government has basically returned to normal levels in previous years, and operating profits in the first quarter of 2019 have started to increase significantly.
Consumer business has shrunk, dragging 天津夜网 on profits has been greatly reduced, the expansion focus strategy will change rapidly, and the comprehensive gross profit margin will also increase to the highest level in years, and the overall momentum is improving.
The stability of the domestic market is an important basis for hedging the impact of external events. The domestic market of its business has increased significantly in the overall market, which will provide deterministic guarantee for the company’s overall improvement.
In the beginning, the company will benefit from the entire network upgrade and competition layout optimization driven by 5G construction.
The first five years of 5G are expected to replicate the fast-paced construction rhythm of LTE, and have reached new heights in terms of overall scale and investment cycle.
Neutral expectation, the first stage of domestic mobile access network investment scale is expected to exceed 20% compared to the 4G stage, and the total number of base stations will reach 60 to 70% of the world’s. Under the independent controllable tone, the scale of local manufacturers will be maximized and global competition will increase.
As the industry leader, the company will directly benefit from this round of expansion.
The business pressure brought by 5G will also be transformed into the expansion and upgrade of the fixed network. The construction of transmission networks and IP bearer networks follows closely behind, and the overall scale is expanded and expanded. Global expansion is optimized.Both reached new highs.
The deep coverage of 5G, high-frequency spectrum exploration and network software transformation will make its investment cycle unprecedentedly longer, the network storage scale will increase the value of later soft services, and the company will benefit from the overall network upgrade and competitive improvement brought by 5G in the long term.
5G drives pipeline innovation towards platform development, and major equipment vendors have core values.
The 5G vision clearly states that in order to realize the interconnection of all things, the Internet of Things scenes are very different, and the network openness capability is required for orchestration and deployment of class B and G clients.
From this perspective, the 5G network’s move towards open platform will be a more core capability than the number of base stations. In the long term, it will directly determine that 5G will connect with more scenarios and become ecologically mature.
Therefore, at the starting point of the new round of pipeline innovation, we need to focus on the development of the platform in the medium and long term, and the network will be more deeply involved in business.
The softwareized and open transformation of the telecommunications network is also beneficial for operators to open source and reduce expenditures. In fact, their own pipeline layout, but operators lack technical capabilities and rely directly on relying on major equipment vendors to provide solutions and traction. Leading manufacturers such as ZTE are in the standard.The core value of the scheme, technology and implementation.
The implementation of the mature IoT scene will reset more aspects to support the development of government and corporate affairs, and the company value will continue to increase in the era of the IoT.
Investment suggestion: We believe that the company has replaced the expected historical burden and is poised for a new starting point for 5G.
It is expected that the company’s net profit attributable to mothers will be 46 from 2019 to 2021.
4.9 billion, 60.
3.5 billion and 75.
09 billion yuan, the corresponding EPS is 1.
44 and 1.
Based on the company’s leading specifications and 5G potential development space, the company will be given a price-earnings ratio of 30 times in 2020, with a target city size of 180 billion U.S. dollars and a BUY rating.
Risk warning events: trade disputes are pending, 5G investment is less than expected, systemic market risks, technology risks, competition risks