On the evening of October 25, ZTE (SZ.000063) released its third quarter financial report as of September 30, 2018. During the reporting period, ZTE's revenue was RMB 19.3 billion, down 14.34% year-on-year; ZTE's third quarter net profit was RMB 564 million, down 65% year-on-year.
In the first three quarters of this year, ZTE's total operating income was 58.766 billion yuan, down 23.26% year-on-year; the loss amounted to 7.26 billion yuan, down 285.92% year-on-year.
For reasons of the decline in performance, the company said that on the one hand, the US imposed a US$1 billion fine on the company and a further $400 million in fines. On the other hand, the US Department of Commerce issued a ban before it caused the company’s main business activities for a period of time. Conducted, resulting in operating losses and accrued losses.
Due to the huge impact of the ban and fines, ZTE’s recovery path is long. According to ZTE's forecast for the performance of FY18, it is estimated that the annual loss will be 6.2 billion yuan to 7.2 billion yuan, and the profit for the same period of the previous year was 4.568 billion yuan, down 235.72%-257.61%.
As of September 30, 2018, the monetary funds held by ZTE had dropped from RMB 33.4 billion at the end of last year to RMB 15.5 billion.
In terms of R&D, ZTE's R&D expenses in the third quarter were 3.465 billion yuan, up 37.47% year-on-year. These expenses are mainly invested in core technology areas such as 5G wireless, core network, bearer, access, and chip.
After the sanctions incident, technologies such as 5G are considered to be an important basis for ZTE's next business revitalization.
The new CEO Xu Ziyang said at the previous extraordinary shareholders meeting that the production of ZTE has returned to normal. The research and development progress has already caught up with the target set at the beginning of the year. The progress of the 5G test has fully caught up with the national test progress and the after-sales service capability has fully recovered.
“In the domestic business recovery situation is good, the international business has been affected by the rejection order, resulting in the loss of orders. Most of the current international operators still maintain confidence and patience with ZTE. ZTE is gradually conducting peer-to-peer negotiations with important global operators. The feedback is good. . According to Xu Ziyang, ZTE plans to return to the normal growth track of the operator network business in 2019 on the basis of business recovery in 2018. In 2020, it will grasp 5G large-scale commercial opportunities and achieve rapid development.
However, according to data from the industry research firm Dell & rsquo; Oro Group, Ericsson’s mobile network market share is rising in the second quarter, while Samsung Electronics has jumped to fourth place. Ericsson and Samsung, the second-largest wireless access network (RAN) equipment manufacturers, benefited from the growth in demand in the US, and ZTE fell to fifth place after being hit in April.
Dell’Oro network equipment data is often the benchmark for recognized industry share market rankings. But it refused to disclose actual income figures.
However, as the domestic 5G spectrum resources are about to be determined, the 5G commercial market will be further opened.
The reporter noted that in mid-August, ZTE announced the completion of the third phase of the IMT-2020 (5G) promotion group NSA 3.5GHz field test, the peak cell throughput of nearly 10Gbps, all test cases passed at one time. At this point, ZTE completed all test cases in the NSA 3.5GHz laboratory and the field, and the next step will be to test the NSA 4.9GHz and SA.
As a partner, ZTE has provided a 5G end-to-end solution for China Telecom's Xiong'an New District, achieving the first 5G autopilot service docking test in China, the first 5G water surface coverage test and panoramic live broadcast. At the same time, it also joined the Haier Air Conditioning and other members of the shared home appliance ecological alliance to jointly release the first shared air conditioning standard based on NB-IoT in the Internet of Things era.
On the 25th, ZTE closed at 17.44 yuan per share, up 0.87%. At present, the market value of ZTE is 73.12 billion yuan.