ZTE(000063) 华龙证券·2024-08-21 11:00Investment Rating - The report assigns a "Buy" rating to ZTE Corporation (000063 SZ) [3] Core Views - ZTE Corporation maintains steady performance in the first half of 2024, with total revenue reaching RMB 624 87 billion, a year-on-year increase of 2 94% [2] - The company's government and enterprise business revenue grew significantly by 56 09% to RMB 91 2 billion, driven by server and storage revenue growth [2] - ZTE continues to focus on the "connectivity + computing power" strategy, with R&D expenses accounting for 20 4% of revenue in the first half of 2024, totaling RMB 127 3 billion [3] - The company holds over 90,000 global patent applications and 46,000 authorized patents, including approximately 5,000 AI-related patent applications and over 2,000 authorized patents [3] Business Performance Operator Network - Revenue decreased by 8 61% to RMB 372 96 billion, mainly due to domestic investment environment factors [2] - Gross margin increased slightly by 0 12 percentage points to 54 32% [2] Government and Enterprise Business - Revenue surged by 56 09% to RMB 91 2 billion [2] - Gross margin decreased by 5 74 percentage points to 21 77%, primarily due to changes in revenue structure [2] Consumer Business - Revenue grew by 14 28% to RMB 160 19 billion, driven by growth in home terminal and mobile phone products [2] - Gross margin increased by 1 11 percentage points to 18 93% [2] Market Position - ZTE maintains a leading position in wireless and wired core products [2] - The company has achieved breakthroughs in international markets, including Cameroon, Côte d'Ivoire, Thailand, and Africa [2] - ZTE's fixed network products maintain a global leading position, with market share expansion in Italy, Indonesia, and Brazil [2] Financial Forecast - Revenue is expected to grow at 4 58%, 5 84%, and 5 83% in 2024, 2025, and 2026 respectively [4] - Net profit attributable to parent company is projected to reach RMB 10 104 billion, RMB 11 309 billion, and RMB 12 689 billion in 2024, 2025, and 2026 respectively [4] - The current P/E ratio is 12 1x for 2024, 10 8x for 2025, and 9 7x for 2026 [4] Valuation - The report compares ZTE's valuation with peers, showing a 2024E P/E of 11 8x, lower than the industry average of 23 1x [6] - ZTE's market capitalization stands at RMB 1,225 5 billion as of August 20, 2024 [6]