Successfully won the bid for Ericsson base station cables and connectors, maintained the "buy" rating, issued the bid winning announcement on December 6, and successfully won the tender for Ericsson Global negotiation (overseas) bidding project in 2019, the winning product was (4G/5G) base station materials, totaling more than US $6000. Compared with the Ericsson project that won the bid in October 17 (US $16 million), the winning amount has more than tripled, further proving the competitiveness of the company's communication base station cables and connectors. The company's layout in the 5G industry chain involves PCB, connectors, chips, etc., in addition, the company cooperates with major customers to cooperate with IT equipment dedicated high-speed connection components, with a first-mover advantage, and new business growth is expected in the future. It is estimated that the EPS for 18-20 years will be 0.31 EPS 0.44 shock 0.60 yuan, maintaining the "buy" rating.
5G industry chain has a good layout and is expected to benefit from 5G construction in the future.
The company expanded its new optical module products in 2013, entered the field of optical access, laid out PCB and civil-military integration in 2015, and established three research institutes in 2017 to study 5G, optical communications, EMC, connectors, etc.
In recent years, the company continues to promote 5G product research and development, with partners in 5G antenna core technology, core chip design and module production to carry out R & D breakthroughs. On the wireless side, the company can provide the overall solution of 5G base station, including BTS base station solution. In the chip sector, Jiangsu Wanbang Microelectronics, a subsidiary of the company, has a deep accumulation in the core domestic chips for active phased array radar, and the company is expected to promote its business development in the 5G RF link with the help of Wanbang. The company has a good layout in the 5G industrial chain, and as the 5G construction starts the operator's capital expenditure to pick up, the company is expected to benefit from profit growth.
Military business is growing steadily, and new products are expected to open up room for growth.
In recent years, the form of offshore defense in China is severe, and the frequency of foreign investigations against China's coastal areas is on the increase. Under this background, the offshore underwater defense system is about to appear. Jinxinuo Changsha Defense Company, a subsidiary of the company, has obtained system-level qualification, engaged in the research and development, production, sales, system integration and technical services of underwater detection, identification, command, control, communication and warning systems with marine defense equipment and technology as the core. At present, the company has completed the development of a number of products, including anti-frogman combat system, blue whale control system, fixed and mobile sonar early warning system and so on. In the future, it is expected to cut into the underwater defense market and open up the space for growth.
The new general manager has served in ZTE for 17 years and has rich market, technical and business experience. In January 2018, the company's board of directors agreed to appoint Mr. Yu Xin as the general manager of the company, responsible for the day-to-day management of the company. Yu Xin worked in ZTE Corporation Co., Ltd from 2001 to 2017. he has successively served as international marketing director, vice minister of commerce and technology, vice minister of operation, general manager of Americas I and general manager of Central and North America, and has accumulated rich market, technology and management experience. Its joining not only enriches the experience and resources of management, but also is expected to promote the transformation and upgrading of the company.
The company is expected to benefit from 5G, the military industry to open room for growth, to maintain the "buy" rating company won the bid is further proof of the competitiveness of the company's products. At the same time, the company continues to expand new application markets through new product research and development. The company has a good layout in the 5G industrial chain and is expected to benefit from the pick-up of operators' capital expenditure under the 5G construction. In addition, the military business layout is expected to further open up the growth space. We are optimistic about the development of the company, and estimate that the net profit of homing in 18-20 years will be 1.79max 2.55 / 345 million yuan respectively, maintain the target price of 11.48-12.36 yuan, and maintain the "buy" rating.
Risk tips: project signing performance is not as expected; 5G construction is not as expected; military business is not as expected.