Source: Wall Street

In the face of 2022 full of uncertainty$ZTE Corporation (000063.SZ)$$ZTE (00763.HK)$It handed over an answer of "double growth of income and net profit" to the market.

ZTE Corporation released its annual report for 2022 on March 11, with operating income of 122.954 billion yuan and net profit of 8.08 billion yuan, an increase of 7.36% and 18.60% respectively over the same period last year.

"with regard to the multiple challenges that various uncertainties bring to business, we firmly grasp the development trend of global digitization and green low-carbon, develop steadily along the established strategic route, insist on doing the best in the most difficult things, and continue to increase investment in research and development. continue to enhance the core competitiveness of key technologies and products." ZTE Corporation Chairman Li Zixue said.

Specifically, ZTE Corporation's operator network, government, enterprise and consumer businesses have all improved to varying degrees, with year-on-year growth of 5.72%, 11.84% and 9.93% respectively in 2022.

Among them, the innovative business represented by "server and storage, 5G industry applications, automotive electronics, digital energy, smart home" has achieved more than 40% growth, laying the foundation for ZTE Corporation's performance development in 2022.

Looking forward to 2023, ZTE Corporation said that he would strengthen the resilience of enterprises and achieve steady growth.

"in 2023, in the face of external risks, the company adheres to precision and pragmatism, the domestic market grasps the market opportunities of the digital economy, and the international market achieves an effective breakthrough around the big country and big net. at the same time, strengthen enterprise resilience, control operational risks, and achieve steady growth." ZTE Corporation said.

Behind the double increase

In the face of the challenges of the external environment, grasping the market opportunities such as 5G new construction is the key to the steady improvement of ZTE Corporation's multiple performance indicators this time.

The dominant service operator network contributed more than 60% of ZTE Corporation's revenue in 2022. As a major participant in domestic 5G scale business, ZTE Corporation's operator network business has increased both in revenue and gross profit margin, generating 80.041 billion yuan in 2022, an increase of 5.72% over the same period last year. In the same period, the gross profit margin reached 46.22%, an increase of 3.77% over the same period last year.

According to the latest report from external institutions, ZTE Corporation's 5G base station, 5G core network and 200G optical transmission port ranked second in the world in 2022.

"the company is the world's leading provider of ICT solutions. As the leading equipment provider, the company will fully benefit from the accelerated construction of 5G and strong R & D strength. We are optimistic about the continued value of the company's strong technology R & D capabilities in new applications." Cinda Securities Communications Industry analyst Jiang Ying pointed out.

In the view of many market participants, with the progress of the 5G large-scale planning and construction plan, the development of operator business will also drive ZTE Corporation to enhance the value of other sectors.

Market analysts believe that at present, the average cloud penetration of real economic enterprises in China is relatively limited, the demand for digital transformation of enterprises is still urgent, and ZTE Corporation's government and enterprise business still has a lot of room for growth. ZTE Corporation's government and enterprise business generated 14.628 billion yuan in 2022, an increase of 11.84 percent over the same period last year.

"at present, the average cloud penetration rate of China's real economy enterprises is about 12%, of which the retail and manufacturing industries have reached an average level of 30%, while the rest of the enterprises are less than 10%. The digital economy is expected to fully empower the digital transformation of enterprises. it has become an important starting point for enterprises to improve production efficiency, and enterprise investment in equipment and digital solutions is expected to continue to increase." Guoxin Securities Communications Industry analyst Ma Chenglong pointed out.

ZTE Corporation's consumer business reached 28.286 billion yuan in 2022, an increase of 9.93% over the same period last year.

According to ZTE Corporation, the service has built a richer intelligent product matrix by gradually integrating mobile phones, mobile Internet products, home information terminals and ecological capabilities.

The performance of market data is also quite eye-catching. For example, ZTE Corporation's mobile Internet product MBB & FWA ranks first in global market share in 2022.

A dazzling second curve

While the first curve business continues to grow, the second curve business represented by ZTE Corporation, such as server and storage, 5G industry applications, automotive electronics, terminals, digital energy, etc., is also comparable.

According to ZTE Corporation, the operating income of the second curve innovation business increased by more than 40% in 2022 compared with the same period last year.

Among them, the business income of server and storage products reached nearly 10 billion yuan, an increase of nearly 80% over the same period last year. ZTE Corporation's shipments ranked among the top three domestic operators in server collection share during the same period, and customers have also expanded to many leading enterprises such as the Internet and financial industries.

The data center business is "blooming inside and outside the wall". ZTE Corporation not only won a number of domestic large-scale operator data center integration projects, but also won five consecutive bids for the Philippine DITO data center project from 2019 to 2022.

In terms of distributed financial database, ZTE Corporation's GoldenDB is the only financial database with core business transformation practices of national policy banks, large state-owned banks, joint-stock banks, city commercial banks, large financial institutions and telecom operators. According to the 2021 China Financial distributed Database Market report released by Sullivan United head Leopard Research Institute at the end of 2022, the overall competitive performance of the GoldenDB market ranked first in a row.

In fact, the growth potential of the database business is also promising for the market. According to the forecast of the Institute of Information and Communication, the compound growth rate of China's database market will reach 23.35% from 2020 to 2025, and the market size is expected to reach 68.8 billion yuan in 2025.

In this context, the future development of ZTE Corporation's database business is also expected.

In terms of automobile intelligence, ZTE Corporation has covered the full scene of intelligent vehicle control, intelligent driving and intelligent cockpit, which has been applied to many car companies, such as FAW and Chang'an Automobile.

"the 4G/5G vehicle gauge-level module products developed and designed by the Group have gained the focus and recognition of domestic mainstream car manufacturers, and have carried out project cooperation with China's FAW, SAIC, Guangzhou Automobile Group and other car factories and partners." ZTE Corporation said, "in the future, the Group will continue to take the underlying technology as the core, work with partners to implement the 'chip + software' paradigm, promote the technological innovation of the entire vehicle factory, and work together to provide high-quality experience for the end customers."

It is worth mentioning that in order to adapt to the rapid growth of the second curve business, ZTE Corporation has successively set up special task forces in various industries, including mining, metallurgical steel, and automotive electronics, so as to promote the continuous replication of industry plans.

This is also inseparable from ZTE Corporation's huge investment in research and development. ZTE Corporation's R & D expenditure in 2022 was as high as 21.602 billion yuan, an increase of 14.88 percent over the same period last year, accounting for 17.57 percent of operating income.

"the company will further improve operational efficiency and move forward from effective to efficient; continue to increase the attraction and motivation of core talents; improve the compliance system, strengthen internal control, guard against corporate risks, and accurately allocate resources to strengthen enterprise resilience. We will promote the landing of the double-carbon strategy and support the company's long-term development." ZTE Corporation said.

Edit / jayden