海外核心资产启示录系列：苹果，扩大用户基础，丰富内容生态.docxVIP

US Stock Market AnalystYidong ZHANG zhangyd@xyzq Analyst Yidong ZHANG zhangyd@xyzq .cn SFC： BIS749 SAC： S0190510110012 Contact Kevin HONG hongjiajun@xyzq .cn SAC： S0190519080002 Meng CAO caomeng@xyzq .cn SAC： S0190118070147 October 21, 2019Apples value comes from three kinds of moats: ecology, product ability and cash reserves. 1) Ecology: Apples exclusive operating system successfully builds a positive reinforcement between user experience and user loyalty; 2) Product ability: Apple has a well-rounded RD team to create products with both hardware and software innovation. And Apple has built a strong product chain to massively produced the largest number of smart devices worldwide; 3) Cash reserve: the average OCF of the past five fiscal years is $69.6 billion, and the cash and financial assets in hand exceed $200 billion, which means Apple has a strong ability to conduct technical defense by acquisitions or investments. Apples valuation has solid cash flow support. The company started to repurchase many stocks from FY13. Since then, the annual cashback of shareholder repurchasing + dividends increased from $33.4 billion in FY13 to $86.5 billion in FY18, and the return on market cap at the end of each past 6 fiscal years was between 7% and 11%. If we measure the FCF return on market value deducting the book value of financial assets, the ratio of FCF/(market cap - financial assets) is about 19%/18%/ll%/8% at the end of FY15 to FY18. We can see Apples stock was significantly undervalued at the end of FY15 and FY16. During the mature period of mobile phones, Apples growth mainly comes from price coverage expansion, more usage scenario and the development of content services. Apples service paying users are 420 million, and the quarterly ARPPU is about $27. It is estimated that there are still 500 million iPhone users worldwide who are unpaid users. At the same time, the service scope has expanded to content services of video, games, news, etc. We