5g investment is expected to exceed expectations. The capacity and rate of 5g system will increase significantly compared with 4G system. The wireless cellular system will adopt high-density coverage to improve the transmission rate and system capacity. The same wireless signal coverage area needs to adopt more base station equipment. ZTE, as a core communication equipment supplier, is expected to benefit.

The 5g technology of the company is leading in the world. The company was the first in the world to release fddmassivemimo solution and completed field verification with China Unicom Fujian branch in Quanzhou innovation base, Fujian. The company took the lead in completing the first phase test of 5g in China, with excellent test results. In the network architecture test, the company leads all manufacturers with time first, pass rate first and coverage rate first. The company signed 5g strategic cooperation agreements with operators such as China Mobile, Softbank of Japan, KT of South Korea, Telefonica of Spain and T-Mobile of Germany to establish 5g leadership.

The international market share continued to grow. The performance of international competitors Ericsson and Nokia continued to decline. Benefiting from the bonus of Chinese engineers, the company has a cost advantage over other giants in the communication industry. In terms of technical level, from catching up to surpassing, the company has accumulated more than 68000 patent assets and more than 28000 global authorized patents. It has become a member of more than 70 international standardization organizations and forums. More than 30 experts have served as chairmen and reporters of major international standardization organizations around the world, submitted more than 34000 manuscripts to the international standardization organization, and obtained more than 280 International Standard Editor seats and drafting rights Smart terminals, optical communications, cloud computing, big data and other key products and technical fields have formed technical and patent advantages. The company's product performance has reached the world-class level, the cost advantage continues, and the market share is expected to continue to grow in the future.

Earnings forecast and investment suggestions: the company's performance has increased steadily. It is expected that the company's earnings per share in 2017-2019 will be 1.20 yuan, 1.75 yuan and 2.29 yuan, corresponding to 13.99 times, 9.65 times and 7.37 times of PE. Give the company 20 times PE valuation in 2017, corresponding to the target price of 24.00 yuan, and maintain the company's buy rating.

Risk tip: the operator's capital expenditure is less than expected, and the company's business development is less than expected.