Guoxin Securities·2024-06-13 10:02Investment Rating - The report maintains an "Outperform" rating for ZTE Corporation [4]. Core Views - ZTE Corporation demonstrates steady development with a focus on "computing power + connectivity," achieving record-high operating performance. The company is a globally rare provider of end-to-end 5G equipment solutions, with products covering wireless, wired, cloud computing, terminal products, and professional communication services, operating in over 160 countries and regions. In 2023, the company achieved revenue of 124.25 billion yuan (up 1.1% year-on-year) and a net profit of 9.33 billion yuan (up 15.4% year-on-year) [1][2][11]. Summary by Relevant Sections Industry Overview - Operators and internet companies are increasing investments in computing power, with 5G-A commercial deployment starting this year. The central and local governments have issued policies to clarify computing power planning. The IDC data indicates that the accelerated server market in China reached 9.4 billion USD in 2023, growing by 104% year-on-year. In 2024, operator capital expenditures will continue to tilt towards computing power, with record-high procurement amounts for PC servers (approximately 16.4 billion yuan) and AI servers (approximately 19.1 billion yuan) [1][43]. Competitive Strengths - ZTE Corporation has a high customer barrier due to its 30 years of industry experience and a strong focus on R&D, ranking second in R&D expenditure among listed companies in 2023. The company is one of the only two domestic enterprises to mass-produce 7nm and introduce 5nm chips, with its subsidiary ZTE Microelectronics generating over 10 billion yuan in revenue in 2022, ranking among the top five domestic chip design companies [2][11]. Financial Analysis - The report maintains profit forecasts, expecting net profits for 2024-2026 to be 10.3 billion, 11 billion, and 11.5 billion yuan, respectively. The corresponding current A-share PE ratios are 13, 12, and 11, while H-share PE ratios are 8, 7, and 6. The estimated reasonable price range for A-shares is between 32.3 and 34.0 yuan, indicating a potential upside of 20% to 28% compared to the current stock price [2][3][4]. Business Segmentation - In 2023, ZTE's revenue from the operator business was 82.76 billion yuan, accounting for 67% of total revenue. The consumer business generated 27.91 billion yuan, making up 22%, while the enterprise business contributed 13.53 billion yuan, representing 11%. The operator business is actively developing 5G wireless innovative products, while the consumer segment is seeing growth from new smartphone technologies [17][20]. Future Outlook - ZTE Corporation is focusing on expanding its "computing power + connectivity" strategy, with significant R&D investments in server and storage, terminal, 5G industry applications, automotive electronics, and digital energy. The company has developed high-integration innovative products for 5G-A evolution and is actively collaborating with operators to create benchmark application cases in various vertical industries [23][24][30].