Forecasting a total net profit of RMB1.8-2.4 billion for Q1 2021
16 March 2021, Shenzhen, China — ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the Mobile Internet, today published its 2020 Annual Report and Preliminary Results Announcement of the First Quarter 2021.
According to the report, for the year of 2020, ZTE reported operating revenue of RMB101.45 billion, representing a year-on-year increase of 11.8%. Net profit attributable to holders of ordinary shares of the listed company amounted to RMB4.26 billion, a year-on-year decrease of 17.3%, attributable mainly to the relatively substantial growth in net profit for 2019 comprising a one-off income before taxation of RMB2.66 billion from asset disposal during the third quarter of 2019. Basic earnings per share was RMB0.92.
Meanwhile, the company forecasts that the net profit attributable to holders of ordinary shares of the listed company for the first quarter of 2021 is to reach from RMB1.8 billion to RMB2.4 billion, a year on year growth from 130.8% to 207.7%. According to the company, such growth was mainly attributable to the following two aspects:
Firstly, the company reported a year-on-year growth of operating revenue and continuous recovery in gross margin for the reporting period as well as substantial improvement in profitability, as it continued to optimise its market pattern.
Secondly, during the period, the company transferred 90% Equity Interests in Caltta Technologies Co., Ltd., which record a profit before taxation of approximately RMB774 million.
In 2020, ZTE, despite the challenges of the pandemic and complex external environment, insisted on its initiatives of focusing on major businesses and technological innovations while attaching great importance to operation quality and actively promoting business development, and thereby further promoted its global market share. In 2020, ZTE’s operating revenue in both domestic and international markets increased year-on-year, with operating revenue in domestic and international markets increased by 16.9% to RMB68.05 billion and 2.7% to RMB33.40 billion respectively.
In domestic market, the company, leveraging the development opportunities of 5G and new infrastructure, made great achievements in 2020 in both market share and revenue growth. In terms of international market, ZTE’s gross profit margin rose by 4.9 percentage points to 37.2%, the highest in the last decade, thanks to the company’s commitment to continuously improving its profitability by adhering to healthy corporate operation and exploring high-value markets.
In 2020, the company harvested a year-on-year growth in all its three major services. Specifically, in terms of operating revenue, the company’s operator networks, government and enterprise services and consumer services grew by 11.2% to RMB74.02 billion, 23.1% to RMB11.27 billion and 7.8% to RMB16.16 billion respectively.
During 2020, ZTE strengthened its management over cash flow and collection of sales amounts, and achieved continuous improvement in operational quality. Its net cash flows from operating activities for 2020 rose to RMB10.23 billion, a year-on-year increase of 37.4%, setting a new record again. Meanwhile, the company continuously optimized its balance sheet structure, with the gearing ratio dropping from 73.1% at the end of 2019 to 69.4% at the end of 2020.
Committed to building stronger core competitiveness, ZTE has been continuously enhancing its investment in research and development. For the twelve months ended 31 December 2020, the company’s R&D spending amounted to RMB14.80 billion with a year-on-year growth of 17.9%, which was 14.6% as a percentage of operating revenue, 0.8 percentage point higher than that in 2019. According to the latest report “Who is leading the 5G patent race?” published in February by IPlytics, ZTE has been included global top 3 for its sustainable leadership in 5G declared Standard-Essential Patents(SEP) to ETSI.
In terms of operator network business, ZTE has actively participated in the global 5G construction. Backed up with its serialized products and solutions, the company has been committed to achieving the ultimate experience of customers and the extraordinary efficiency of networks, expecting to build the most cost-effective 5G networks. Its 5G wireless products, 5G core networks and 5G transport products respectively account for more than 30% of the domestic operator market. According to a report from an external organization, ZTE ranked No.2 in the world in terms of global shipment of 5G base stations in 2020. Also, the company ranked No.2 in terms of global operator market share of optical network. With the total user capacity of video system exceeding 150 million, ZTE has achieved further market share growth. The company’s full series of 5G power supply products and solutions have safeguarded the power supply for over 200,000 5G sites around the world.
In the government and enterprise business, ZTE has focused on major industries, like energy, transportation, government affairs, finance and the like. Relying on Precision Cloud Networks and Empowerment Platforms, ZTE has been committed to new infrastructure deployment, 5G industrial applications, and digital transformation upgrade. Meanwhile, the company’s Data centers, general server storage products, videoconferencing, distributed databases, operating system, and other core product solutions have been widely applied into the field of government and enterprise. By virtue of the distributed database management system GoldenDB, ZTE has strengthened the leading commercial position in the core domestic financial service field, with database covering the full series of banking service systems in China. Meanwhile, ZTE has applied for more than 200 core patents in GoldenDB and won the 2020 PMI (China) Project Excellence Award.
In addition, ZTE’s full-module data center solution has been put into commercial use, with over 300 project cases worldwide. Its enterprise secure remote office solution has helped enterprises resume work and production during the pandemic. ZTE, together with more than 500 partners, has carried out 5G application innovation and commercial practice, achieving almost 100 5G innovation application scenarios.
As for consumer business, ZTE continued to strengthen the cooperation in 5G terminal devices with more than 30 operators worldwide and integrate the resources of ZTE, Nubia and RedMagic. Driven by these three forces, it has made steady development in the international market and taken comprehensive steps in cultivating the domestic consumer market, thereby creating a new and recognizable image of high-tech, high quality, and youth.
In 2020, ZTE unveiled the world’s first under-display camera smartphone, ZTE Axon 20 5G. The home network terminals and integrated innovation terminals have maintained a global dominant position in the industry for a long time. To date, the new-generation 5G Indoor CPE has been launched constantly in the overseas markets.
Moving forward, ZTE, while solidifying its position with innovative initiatives, will be committed to becoming a road builder of the digital economy. The company will spare no efforts to overcome the hardest challenges to improve its core competitiveness. In addition, the company will actively empower the digital transformation and intelligent upgrade of the society, with an aim of achieving quality growth. Also, the company will continue to attract and motivate core talents, improve its compliance management system, and strengthen its internal control and management.
With the future being just around the corner, ZTE is poised to work with industrial and ecological partners to build stronger core competence, aiming to achieve high-quality growth together.