The performance in the first quarter is under pressure, 5G new infrastructure enters the acceleration period.
The company released its annual report in 2019 and quarterly report in 2020. The company realized revenue and net profit of 1.871 million yuan in 2020, while the annual report of 2019 was slightly lower than expected. 2020Q1 realized revenue and net profit of 261 million yuan /-3.56 million yuan, YoY-25.7%/-124.0%. Affected by the epidemic in the first quarter, the performance is under short-term pressure. With the operators' collection and recovery rate increasing, the company's revenue will return to the normal growth track. We expect the company's EPS to be 1.21 EPS 1.40 shock 1.55 yuan (the previous value is 1.51 shock 1.92 shock-yuan) in 2022, maintaining a "buy" rating.
5G boosted gross profit margin, and ZTE's revenue side increased significantly.
In 2019, the company's comprehensive gross profit margin was 18.8% (YoY+3.79pct). From a single product point of view, RF device gross margin 16.1% (YoY+2.5pct), antenna gross margin 26.7% (YoY+8.1pct). We believe that the reason for the higher gross profit margin is that the gross profit margin of 1919 5G products is higher and the sales share is higher. The revenue of the largest customer increased by 150% compared with the same period last year, indicating the company's position as a core supplier in ZTE. Overall 19-year expense rate YoY+0.6pct, including R & D expense rate YoY+0.7pct, sales expense rate YoY+0.1pct, management expense rate YoY-0.4pct.
The performance was affected by the epidemic in the first quarter.
The company was affected by the epidemic in the first quarter of 20 years, resulting in a decline in both revenue and net profit. The whole industry has been affected by the epidemic in varying degrees. Recently, the three major operators have landed 5G collection one after another. From the share point of view, the downstream customers of the company, ZTE and Ericsson, have achieved good results. As the epidemic slows down and the rate of social return to work continues to increase, we believe that both the revenue and profit end of the company will be greatly improved in the second quarter.
5G new infrastructure has greatly increased industry demand, new products and new customers are waiting for volume we are optimistic about the company's future growth: 1) domestic operators will step up the construction of 5G in 2020, and the capital expenditure of the three major operators will reach 180.3 billion yuan (YoY+337.6%). As the epidemic slows down and operators collect and collect 5G, the company's revenue is expected to increase significantly in 2020. 2) waiting for new products to be released: at present, the company has completed the first phase expansion of 5G ceramic waveguide filter, and will promote the second phase expansion plan of ceramic filter in the future. wait for the release of customer demand; 3) horizontally expand new customers: the company was originally one of the main suppliers of antenna RF products of ZTE Corporation and Japan Electric Industry, but now it has successfully entered the Ericsson supplier system and is expected to open up the incremental market space. In overseas markets, the company is also actively promoting antenna products into the supplier system of T-Mobile, AT&T Inc and other operators.
5G antenna RF upstart, maintaining a "buy" rating
Considering the possible excess performance provision reward in 2020, we adjust the management expense rate for 20 years, and we estimate that the company's net return profit in 2020-2021 will be 2.03 pound 2.35 billion yuan, respectively (the previous value is 2.55 pound), and the corresponding PE will be 29Universe 23x. Comparable companies in the same industry unanimously expect the average PE to be 38x in 2020. we think it is possible to give the company a valuation level of PE 33-38x in 2020, corresponding to the target price of 39.93-45.98 yuan (the previous value is 45.3-52.9 yuan) and maintain the "buy" rating.
Risk tips: 5G development is lower than expected; horizontal expansion customers are not as expected; self-developed ceramic dielectric filter scheme is not as expected.