研究报告全文：MN10Oct2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateZTE000063CHAdefensiveplaywithlongrunwayforgrowthZTEsrecentupdateonAI-relateddevelopmentAtarecentinvestorrelationsTargetPriceRMB395eventtheCompanyshedlightonitsprogressinAIdevelopmentfortheB2BsectorPreviousTPRMB417TheCompanyfeaturedafoundationalAImodelaRDmodelAI-assistedUpDownside209programmingatelecommodelstreamlinetelecomcarriersoperationsandanCurrentPriceRMB3268industry-specificmodelfocusingonurbangovernanceaimedtoberolledoutChinaTechnologybetweenyear-endandearly2024CapitalizingontheAImomentumspurredbyLilyYANGPhDChatGPTin1H23theCompanyissettodebutnewcomputationalproductsandis85239163716ontracktolaunchanAIserverspecificallyengineeredforintensivemodeltraininglilyyangcmbicomhkWeobserverisingpopularityofsatellitecommunicationasHuaweisKevinZHANGMate60ProcouldsupportsatellitecallingZTEsAxon50Ultracanalsofacilitate85237618727two-waycommunicationmessagesviatheBeiDousatellitesystemInarecentkevinzhangcmbicomhkmilestoneZTEpartneredwithChinaTelecomUNISOCandVivoandachievedtheStockDatafirst-everdomestic5GNTNnon-terrestrialnetworkfieldtestinChinaThisMktCapRMBmn1518333Avg3mthstoRMBmn26698accomplishmentsignifiesthesuccessfulestablishmentofabi-directionalconnection52wHighLowHK45542052for5GNTNmobilephonesdirectlylinkedtosatellitesinareal-worldsettingWeTotalIssuedSharesmnNASourceFactSetbelieveZTEwillbeakeybeneficiaryinthismarketconsideringmoreconsumerelectronicswillbeequippedwithsatellitecommunicationsShareholdingStructureZTEHoldings23865Gto6GintothenextchapterWithincreasinginterestinsatelliteNationalSocialSecurityFund182communicationsthemarketiswaitingfortheprogressof6GdevelopmentCAICTSourceBloombergpredictedthatthenumberof6GterminalconnectionsofvarioustypeswillincreaseSharePerformancebymorethan30timescomparedto2022andtheaveragemonthlytrafficwillAbsoluteRelativeincreasebymorethan130timeswhichwillsignificantlydrivethedemandfor1-mth-35-043-mth-245-192telecommunicationequipmentGivenZTEsstrongpresenceintherelevantfields6-mth-2998itiswell-positionedtoextenditsleadershipintothe6GcompetitionSourceFactSetH-sharemaintainBUYwithunchangedTPofHK294WeupdateTPofA-12-mthPricePerformancesharetoRMB395basedon165x3-yearavgrolloverFY24EPEMaintainBUYCurrentlytheCompanyisexperiencingsteadygrowthmarkedbyacontinuousincreaseinmarketshareandanoticeableenhancementingrossprofitmarginsKeyareasoffocusinclude1theCompanysprogressintheservermarketespeciallyforAIservers2thedevelopmentandcommercializationprogressoffoundationallargemodelsintheirv20iteration3RDeffortsinSourceFactSetsatellitecommunicationaswellasinvestmentopportunitiesinrelatedindustrychainsand4thelatestdevelopmentintherealmof6GPotentialrisksincludeChina-UStradetensionsadditionalcomponentrestrictiontechnologybanand5GdeploymentdelaysEarningsSummaryYE31DecFY21AFY22AFY23EFY24EFY25ERevenueRMBmn114522122954132278144074156765YoYgrowth12974768988Grossmargin352372412410407NetprofitRMBmn6813786798861165313312YoYgrowth599155257179142PEx265228190165143ROE132134144147145DilutedEPSRMB147171205240274NetgearingNetcashNetcashNetcashNetcashNetcashSourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk10Oct2023ZTEhasabroadpresenceintheAIserverecosystemInthefieldofcomputationalinfrastructureZTEalreadyhasafullrangeofserversandstorageproductsincludinggeneralserversGPUserversliquid-cooledserversaswellasall-flashstorageproductsandhybridflashstorageproductsspanningacrossthemajorityofAIserverecosystemFigure1AIServerValueChainUpstreamKeyComponentsSoftwareLANCPUHarddriveDatabaseSwitchOperatingGPUPCBBatterysystemRAMDPUMiddlewareOAMidstreamAIServersDownstreamApplicationsInternetCompaniesCloudServiceProvidersTelecomFinancialGovtAgenciesInstitutionsSourceCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE210Oct2023Whiletheindustryiscurrentlyfocusedonlarge-scalegenericmodelstherealconcernforbusinessesshouldbeontheirvalueinspecificindustryapplicationsInviewofthisZTEissettoofferAIinfrastructureservicestailoredtofoundationalmodelsthatspanawiderangeofknowledgezonesNotonlywilltheyprovidecomprehensivesupportformodeltrainingandlogicalreasoningbutalsointroducespecializedmodelstargetingspecificindustryneedsensuringanoverallsmoothdigitaltransformationPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE310Oct2023ZTEjoiningthesatellitecommunicationleagueIn2022amidasluggishmobilemarketsatellitecommunicationemergedasavitalbreakthroughformanyhandsetcompaniesApplesiPhone14seriesintroducedasatellitecommunicationfeaturealbeitlimitedtoonlysendingmessagesAroundthesametimeHuaweilauncheditsMate50PromarkingthecompanysentryintosatellitecommunicationphonesAndinearly2023ZTEreleaseditsAxon50UltrathatsupportedsatellitemessagingcommunicationThisoveralltrendcouldalsoimplythatsatellitecommunicationoffersopportunitiesnotjustforhandsetsbutalsoforvariousotherconsumerelectronicproductsAsthemobilesatellitecommunicationvaluechaincontinuestoevolvetherearesignificantprospectsfortelecomcarriersmobilecompanieshardwaresoftwaredevelopersetctounlockthefullpotentialofthisnewtechFigure2SatelliteCommunicationValueChainSatelliteManufacturingManufacturingOtherkeyareasOtherelectronicRFchipRawmaterialcomponents中国航天科工集团SatelliteLaunchingGroundEquipManufacturingRocketManufacturingGroundStationGroundterminalTelecomcarriercorechipEquip中国航天科工集团SatelliteOperationServiceNationalDefenceSatelliteApplicationsServiceProviderTelecomCarriersSourceCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE410Oct2023ZTEtobenefitfromthetransitionfrom5Gto6GIn2020ZTEenteredintoanagreementwithChinaUnicomtocollaborateon6GtechnologyTheCompanyoutlinedaresearchphasefrom2020to2023toexplorenetworkdemandsstructuralaspectsandtechnologicalcapabilitiesfor6GByJune2023thecompanypubliclyannouncedthecommencementofresearchoncrucial6GtechnologiesZTEanticipatedthat6Gwouldbeaseamlessevolutionbuildinguponthesuccessof5Gand5G-advancedparadigmConsequentlyZTEbelievedthattheirwell-establishedtechnologicalexpertisein5G-relateddomainscouldbeeffectivelyextendedtotherealmof6GFigure36GNetworkValueChainServiceProvidersCoreNetworkTransmissionNetworkAccessNetworkTelecomCarriersConnectionEquipmentDownstreamApplicationsSmartCityLivestreamingInternetofSmartCarsBuildingsSmartIndustrySmartMiningSmartMedicalGamingSourceCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE510Oct2023FinancialSummaryINCOMESTATEMENT2020A2021A2022A2023E2024E2025EYE31DecRMBmnRevenue101451114522122954132278144074156765Costofgoodssold693797416077228777248500092954Grossprofit320714036245727545545907463811Operatingexpenses264833182835166427154630850152Sellingexpense757987339173100521080411599Adminexpense499554455333550159206363SGAexpense685787951149716311775RDexpense147971880421602278363031832989Others157319411893217123652573Operatingprofit5589853410561118391276513659Otherincome238250196163177193Otherexpense644427239258281306GainlossonfinancialassetsatFVTPL391099114243100Investmentgainloss9061564108741700Othergainslosses6431558154889714091390EBIT54859462891599991125312156NetInterestincomeexpense421963163126520273013Otherincomeexpense164979657000Pre-taxprofit506484998752112641328015169Incometax3421463960123014541658Aftertaxprofit472270367792100341182713511Minorityinterest44622375148174199Others1600000Netprofit42606813786798861165313312Netdividends92613901840965973973BALANCESHEET2020A2021A2022A2023E2024E2025EYE31DecRMBmnCurrentassets106977127871137874146851162909179050Cashequivalents314033907147072560066955385527Restrictedcash4256116429274838783878387Accountreceivables170431886319098193171976120612Inventories336893631745235442014429242295Prepayment322607279506535591FinancialassetsatFVTPL10371361514431471512Othercurrentassets192262001116402180031991021127Non-currentassets436584089243080421904371845376PPE129541281013877145941540216315Right-of-useassets10478151080103110081009Deferredincometax343731953719377341244480InvestmentinJVsassos374936993765379439844176Intangibles11440105489926956390198393Goodwill18600000FinancialassetsatFVTPL153711751028102810281028Othernon-currentassets930786509685840791539975Totalassets150635168763180954189041206626224426Currentliabilities786857439578424727598093886590Short-termborrowings8947105599962600574468055Accountpayables367803286913520137371560615719Taxpayable121687817700150161641317827Othercurrentliabilities3949454518167184252007721750Contractliabilities277932554419075195762139723240Non-currentliabilities301173679142987465954506344674Long-termborrowings226142990835126383343603334866Bondpayables000000Obligationsunderfinanceleases718532789741810880Deferredincome134150878694102Othernon-currentliabilities665162006985743481268826Totalliabilities108803111185121410119354126002131264Sharecapital461347314736482748654865Capitalsurplus11500000Retainedearnings148242065127309353514603558369PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE610Oct2023Otherreserves239742610026596284592850128506Totalshareholdersequity432975148258641686377940191740Minorityinterest28261806902105012231422Totalequityandliabilities154925164473180954189041206626224426PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE710Oct2023CASHFLOW2020A2021A2022A2023E2024E2025EYE31DecRMBmnOperatingProfitbeforetaxation472270367792100341182713511Depreciationamortization397145884386478352895728Taxpaid96325858756343347Changeinworkingcapital1001235784711926111235Others350414844458364807154Netcashfromoperations10233157247578166902314325810InvestingCapitalexpenditure647256864952567861956735Acquisitionofsubsidiariesinvestments62051273636795230233Netproceedsfromdisposalofshort-term922124542605658investmentsOthers1021845047187800Netcashfrominvesting17300110421762505358206310FinancingDividendpaid295126183688390429922968Netborrowings129453095442749860559Proceedsfromshareissues141675381711950770Others102114504711000Netcashfromfinancing29027791455271237763526NetchangeincashCashatthebeginningoftheyear285063140339071470725600669553Exchangedifference37242260000Others28617910774189341354615974Cashattheendoftheyear314033907147072560066955385527GROWTH2020A2021A2022A2023E2024E2025EYE31DecRevenue11812974768988Grossprofit492581331938380Operatingprofit3995272371217870EBIT3257255812212580Netprofit173599155257179142PROFITABILITY2020A2021A2022A2023E2024E2025EYE31DecGrossprofitmargin316352372412410407Operatingmargin557586898987ReturnonequityROE118144143155157156GEARINGLIQUIDITYACTIVITIES2020A2021A2022A2023E2024E2025EYE31DecNetdebttoequityx171211080604Currentratiox141718202021VALUATION2020A2021A2022A2023E2024E2025EYE31DecPE224129851079180PEdiluted224129851079180SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE810Oct2023DisclosuresDisclaimersAnalystCertificationTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportinwholeorinpartcertifiesthatwithrespecttothesecuritiesorissuerthattheanalystcoveredinthisreport1alloftheviewsexpressedaccuratelyreflecthisorherpersonalviewsaboutthesubjectsecuritiesorissuerand2nopartofhisorhercompensationwasisorwillbedirectlyorindirectlyrelatedtothespecificviewsexpressedbythatanalystinthisreportBesidestheanalystconfirmsthatneithertheanalystnorhisherassociatesasdefinedinthecodeofconductissuedbyTheHongKongSecuritiesandFuturesCommission1havedealtinortradedinthestockscoveredinthisresearchreportwithin30calendardayspriortothedateofissueofthisreport2willdealinortradeinthestockscoveredinthisresearchreport3businessdaysafterthedateofissueofthisreport3serveasanofficerofanyoftheHongKonglistedcompaniescoveredinthisreportand4haveanyfinancialinterestsintheHongKonglistedcompaniescoveredinthisreportCMBIGMRatingsBUYStockwithpotentialreturnofover15overnext12monthsHOLDStockwithpotentialreturnof15to-10overnext12monthsSELLStockwithpotentiallossofover10overnext12monthsNOTRATEDStockisnotratedbyCMBIGMOUTPERFORMIndustryexpectedtooutperformtherelevantbroadmarketbenchmarkovernext12monthsMARKET-PERFORMIndustryexpectedtoperformin-linewiththerelevantbroadmarketbenchmarkovernext12monthsUNDERPERFORMIndustryexpectedtounderperformtherelevantbroadmarketbenchmarkovernext12monthsCMBInternationalGlobalMarketsLimitedAddress45FChampionTower3GardenRoadHongKongTel85239000888Fax85239000800CMBInternationalGlobalMarketsLimitedCMBIGMisawhollyownedsubsidiaryofCMBInternationalCapitalCorporationLimitedawhollyownedsubsidiaryofChinaMerchantsBankImportantDisclosuresTherearerisksinvolvedintransactinginanysecuritiesTheinformationcontainedinthisreportmaynotbesuitableforthepurposesofallinvestorsCMBIGMdoesnotprovideindividuallytailoredinvestmentadviceThisreporthasbeenpreparedwithoutregardtotheindividualinvestmentobjectivesfinancialpositionorspecialrequirementsPastperformancehasnoindicationoffutureperformanceandactualeventsmaydiffermateriallyfromthatwhichiscontainedinthereportThevalueofandreturnsfromanyinvestmentsareuncertainandarenotguaranteedandmayfluctuateasaresultoftheirdependenceontheperformanceofunderlyingassetsorothervariablemarketfactorsCMBIGMrecommendsthatinvestorsshouldindependentlyevaluateparticularinvestmentsandstrategiesandencouragesinvestorstoconsultwithaprofessionalfinancialadvisorinordertomaketheirowninvestmentdecisionsThisreportoranyinformationcontainedhereinhavebeenpreparedbytheCMBIGMsolelyforthepurposeofsupplyinginformationtotheclientsofCMBIGMoritsaffiliatestowhomitisdistributedThisreportisnotandshouldnotbeconstruedasanofferorsolicitationtobuyorsellanysecurityoranyinterestinsecuritiesorenterintoanytransactionNeitherCMBIGMnoranyofitsaffiliatesshareholdersagentsconsultantsdirectorsofficersoremployeesshallbeliableforanylossdamageorexpensewhatsoeverwhetherdirectorconsequentialincurredinrelyingontheinformationcontainedinthisreportAnyonemakinguseoftheinformationcontainedinthisreportdoessoentirelyattheirownriskTheinformationandcontentscontainedinthisreportarebasedontheanalysesandinterpretationsofinformationbelievedtobepubliclyavailableandreliableCMBIGMhasexertedeveryeffortinitscapacitytoensurebutnottoguaranteetheiraccuracycompletenesstimelinessorcorrectnessCMBIGMprovidestheinformationadvicesandforecastsonanASISbasisTheinformationandcontentsaresubjecttochangewithoutnoticeCMBIGMmayissueotherpublicationshavinginformationandorconclusionsdifferentfromthisreportThesepublicationsreflectdifferentassumptionpoint-of-viewandanalyticalmethodswhencompilingCMBIGMmaymakeinvestmentdecisionsortakeproprietarypositionsthatareinconsistentwiththerecommendationsorviewsinthisreportCMBIGMmayhaveapositionmakemarketsoractasprincipalorengageintransactionsinsecuritiesofcompaniesreferredtointhisreportforitselfandoronbehalfofitsclientsfromtimetotimeInvestorsshouldassumethatCMBIGMdoesorseekstohaveinvestmentbankingorotherbusinessrelationshipswiththecompaniesinthisreportAsaresultrecipientsshouldbeawarethatCMBIGMmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreportandCMBIGMwillnotassumeanyresponsibilityinrespectthereofThisreportisfortheuseofintendedrecipientsonlyandthispublicationmaynotbereproducedreprintedsoldredistributedorpublishedinwholeorinpartforanypurposewithoutpriorwrittenconsentofCMBIGMAdditionalinformationonrecommendedsecuritiesisavailableuponrequestForrecipientsofthisdocumentintheUnitedKingdomThisreporthasbeenprovidedonlytopersonsIfallingwithinArticle195oftheFinancialServicesandMarketsAct2000FinancialPromotionOrder2005asamendedfromtimetotimeTheOrderorIIarepersonsfallingwithinArticle492atodHighNetWorthCompaniesUnincorporatedAssociationsetcoftheOrderandmaynotbeprovidedtoanyotherpersonwithoutthepriorwrittenconsentofCMBIGMForrecipientsofthisdocumentintheUnitedStatesCMBIGMisnotaregisteredbroker-dealerintheUnitedStatesAsaresultCMBIGMisnotsubjecttoUSrulesregardingthepreparationofresearchreportsandtheindependenceofresearchanalystsTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportisnotregisteredorqualifiedasaresearchanalystwiththeFinancialIndustryRegulatoryAuthorityFINRATheanalystisnotsubjecttoapplicablerestrictionsunderFINRARulesintendedtoensurethattheanalystisnotaffectedbypotentialconflictsofinterestthatcouldbearuponthereliabilityoftheresearchreportThisreportisintendedfordistributionintheUnitedStatessolelytomajorUSinstitutionalinvestorsasdefinedinRule15a-6undertheUSSecuritiesExchangeActof1934asamendedandmaynotbefurnishedtoanyotherpersonintheUnitedStatesEachmajorUSinstitutionalinvestorthatreceivesacopyofthisreportbyitsacceptancehereofrepresentsandagreesthatitshallnotdistributeorprovidethisreporttoanyotherpersonAnyUSrecipientofthisreportwishingtoeffectanytransactiontobuyorsellsecuritiesbasedontheinformationprovidedinthisreportshoulddosoonlythroughaUS-registeredbroker-dealerForrecipientsofthisdocumentinSingaporeThisreportisdistributedinSingaporebyCMBISingaporePteLimitedCMBISGCompanyRegnNo201731928DanExemptFinancialAdviserasdefinedintheFinancialAdvisersActCap110ofSingaporeandregulatedbytheMonetaryAuthorityofSingaporeCMBISGmaydistributereportsproducedbyitsrespectiveforeignentitiesaffiliatesorotherforeignresearchhousespursuanttoanarrangementunderRegulation32CoftheFinancialAdvisersRegulationsWherethereportisdistributedinSingaporetoapersonwhoisnotanAccreditedInvestorExpertInvestororanInstitutionalInvestorasdefinedintheSecuritiesandFuturesActCap289ofSingaporeCMBISGacceptslegalresponsibilityforthecontentsofthereporttosuchpersonsonlytotheextentrequiredbylawSingaporerecipientsshouldcontactCMBISGat6563504400formattersarisingfromorinconnectionwiththereportPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE9