ZTE's (the "Company"), FY21 results were in line with the previous preliminary results announcement. Revenue increased by 12.9% yoy.
Gross profit margin increased by 3.6 ppt yoy to 35.2%. Shareholders' net profit increased by 59.9% yoy, while shareholders' net profit after extraordinary items was up by 219.2% yoy.
We expect the Company's three main business lines to all maintain steady growth. We expect that China's 5G base stations volume will be about 600,000 in each year of 2022-2023. We expect the market share of the Company in domestic telecom equipment to improve. Besides, part of the unrealized orders in 2021 will be realized in 2022. Overall, we expect carriers' network business to grow by double-digit percentage in 2022. We expect that the broad market space and the Company's active channels expansion will continue to bring steady growth momentum to government and corporate business. We expect consumer business to still grow in 2022, but the growth rate will largely slow compared to 2021, given the already high base.
We expect gross margin to be stable in FY22. Given that 5G business is already relatively stable, we expect gross margin of carriers' network business to be stable, overall, we expect gross margin to be stable and between 35%-36% in FY22.
We revise down TP from HK$30.00 to HK$26.00 but maintain the investment rating as "Buy". We revise down FY22-FY23 EPS forecasts by 2.3%/ 4.7%. The TP represents 12.4x, 11.6x and 11.3x FY22-FY24 PER.