Core Viewpoint - Huayuan Securities has initiated coverage on ZTE Corporation (00763), recognizing it as the fourth largest telecommunications equipment supplier globally, with a stable operator network business and a promising second growth curve from computing and terminal businesses, assigning a "Buy" rating [1] Business Segments - **Connection Business**: The operator network business remains solid, achieving a gross margin of 52.94% in H1 2025, serving as a significant cash flow source. The company is also advancing in 5G-A technology and promoting the deployment of 400G optical networks [2] - **Computing Business**: The emergence of AI large models has created substantial demand for computing power. The company is seizing this opportunity by expanding its computing infrastructure-related business, which includes servers, storage, switches, and data center products. In H1 2025, revenue from the government and enterprise sector doubled, making it a core growth driver [2] - **Terminal Business**: The company is implementing the "AI for All" concept, continuously expanding AI technology applications in terminal devices, particularly in the smartphone sector. In H1 2025, the company launched the world's first full-size AI smartphone, Nubia Z70 Ultra, which is expected to enhance user experience and increase AI terminal product shipments [2]

Core Viewpoint - The article discusses the newly released "Shenzhen Plan" which includes 15 clear guidelines aimed at enhancing personal information protection, reflecting a shift towards stricter compliance for companies handling personal data [1][4]. Summary by Sections Privacy Policy Standards - The guidelines require application distribution platforms and apps to provide easily accessible and long-term effective privacy policies, which must include rules for personal information processing, user rights, and complaint channels. Special rules must be established for handling minors' personal information [1][2]. User Consent Management - Operators must inform users about personal information processing in a prominent manner, prohibiting default selections or bundled authorizations. Sensitive personal information requires "separate consent," and users must have effective means to withdraw consent [2][4]. Data Processing Compliance - Operators are mandated to adhere to the principles of "minimum and necessary" data processing, prohibiting blanket authorizations and frequent pop-up requests. Personalized recommendations must offer non-targeted options or easy refusal methods. Generative AI services are restricted from indiscriminately collecting or retaining personal information, and any training data involving personal information must comply with legal standards [2][4]. User Rights Protection - Operators are required to inform users of their rights to access, copy, correct, delete, and restrict processing of their personal information. User requests must be processed within 15 working days without artificial barriers [2][4]. Multi-Party Governance Framework - The initiative aims to establish a multi-party governance framework for personal information protection, involving government regulation, corporate autonomy, industry self-discipline, and social oversight. Key application software distribution platforms have signed a compliance commitment to enhance personal information protection [4][5]. Ongoing Efforts and Future Directions - Shenzhen's efforts include exploring a "law enforcement + service" model, transitioning from punitive measures to proactive legal education and rectification. The city plans to continuously improve long-term mechanisms for personal information protection and enhance collaborative enforcement capabilities [5].

Group 1 - BlackRock's long position in ZTE Corporation increased from 6.66% to 8.36% [1]

Group 1 - BlackRock's long position in ZTE Corporation increased from 6.66% to 8.36% [1]

Investment Rating - The investment rating for the company is "Buy" (首次) [6] Core Views - The company is expected to benefit from the AI trend, with its computing and terminal businesses likely to initiate a new growth phase [6] - The company has a solid market position, ranking fourth globally and second domestically in the telecommunications equipment market, with an 11% market share [8] - The company is transitioning towards a "connectivity + computing" model, with significant growth in its enterprise business, particularly in server and storage products [8] Financial Performance Summary - Revenue projections for the company are as follows: - 2023: 124,251 million RMB - 2024: 121,299 million RMB - 2025E: 138,475 million RMB - 2026E: 156,636 million RMB - 2027E: 174,408 million RMB - The expected growth rates for revenue are: - 2024: -2.38% - 2025E: 14.16% - 2026E: 13.11% - 2027E: 11.35% [7] - The projected net profit attributable to the parent company is: - 2023: 9,326 million RMB - 2024: 8,425 million RMB - 2025E: 8,380 million RMB - 2026E: 8,937 million RMB - 2027E: 10,379 million RMB - The expected growth rates for net profit are: - 2024: -9.66% - 2025E: -0.54% - 2026E: 6.65% - 2027E: 16.14% [7] - The company’s earnings per share (EPS) projections are: - 2024: 1.76 RMB - 2025E: 1.75 RMB - 2026E: 1.87 RMB - 2027E: 2.17 RMB [7] Business Segments - The company is focusing on three main business areas: operator networks, government and enterprise business, and consumer products [8] - The operator network business has a stable foundation, with a gross margin of 52.94% in the first half of 2025, serving as a significant cash flow source [8] - The enterprise business has seen a doubling in revenue, driven by increased investment in computing infrastructure by domestic and international clients [8] - The terminal business is expanding with the introduction of AI technology in devices, including the launch of the Nubia Z70 Ultra, the world's first AI phone with embedded DeepSeek-R1 [8] Valuation and Comparables - The projected net profits for 2025-2027 are 83.80 billion RMB, 89.37 billion RMB, and 103.79 billion RMB, respectively [8] - The current price-to-earnings (P/E) ratios are projected to be 17.57, 16.45, and 14.17 for 2025, 2026, and 2027, respectively [8] - Comparable companies' average P/E for 2025 is 45.40 [8]

Core Viewpoint - ZTE Corporation reported a net profit attributable to shareholders of 5.058 billion yuan for the first half of 2025, a year-on-year decrease of 11.77% [1] - The company is actively expanding its intelligent computing data center projects, which are expected to provide potential growth opportunities in the AI computing cycle [1] Financial Performance - In Q2 2025, ZTE achieved a net profit of 2.604 billion yuan, a year-on-year decrease of 12.94% but a quarter-on-quarter increase of 6.16% [1] - The gross profit margin for Q2 was 30.90%, reflecting a year-on-year decline of 8.08 percentage points and a quarter-on-quarter decline of 3.37 percentage points [1] Business Segments - The revenue from the operator network business experienced a slight decline, while the government and enterprise business showed strong performance [1] - The company is focusing on consolidating its domestic operator network base while actively expanding into intelligent computing data center projects [1] Future Outlook - The company is expected to leverage its traditional communication equipment business as a foundation to develop comprehensive intelligent computing solutions [1] - The intelligent computing business is anticipated to open up potential growth space for the company's performance during the upward cycle of AI computing demand [1]

Core Insights - The core viewpoint emphasizes that AI will replace energy as the most important commodity, driving daily operations across various industries, with computational power being the key element for AI's industrial application [1][12] - The "computational power question" is central to the AI industry, focusing on how to make computational power more accessible and transition from a "technology race" to "industry application" [2] Group 1: Full-Stack Intelligent Computing - ZTE Communications proposed a full-stack open intelligent computing solution that covers hardware systems and AI platforms, ensuring compatibility with mainstream GPU and CPU, allowing businesses to flexibly choose based on their needs [3] - The solution includes self-developed switching chips, intelligent computing servers, super node servers, and AiCube integrated computing machines, enabling efficient training and inference [3] Group 2: Super Node Servers - The super node servers showcased can support 64 GPUs per machine, allowing for vertical and horizontal scaling to meet extreme performance needs, thus supporting millions of user requests and complex predictive models [5] - This solution enables businesses to gradually upgrade their computational power as their operations evolve, rather than requiring an all-in commitment from the start [5] Group 3: Intelligent Computing Centers - The intelligent computing center focuses on energy efficiency, with a modular and prefabricated architecture that reduces delivery cycles by 40% and significantly lowers energy consumption [7] - As of June 2023, China's operational computing center rack scale reached 10.85 million standard racks, with intelligent computing capacity growing by approximately 40% compared to 2023 [6][7] Group 4: Collaborative Ecosystem - The partnership between ZTE Communications and Alibaba Cloud has evolved over 13 years, expanding from the Chinese market to a global presence, indicating the importance of collaboration in advancing AI industry [8] - The collaboration aims to create a symbiotic ecosystem that integrates software and hardware, supply and demand, and domestic and international markets [8][9] Group 5: Global Solutions - ZTE Communications and Alibaba Cloud have established cloud capability centers in various countries, promoting a "joint development + local delivery" model that meets local regulations and market needs [11] - This approach transforms "Chinese-style computing engineering" into globally applicable solutions, supporting enterprises in their international operations [11][12]

Core Points - Major companies including Tencent, Huawei, and OPPO signed a compliance operation commitment to enhance personal information protection [1][2] - The commitment includes strict adherence to app listing review standards and responsibilities for managing personal information [1] - The initiative aims to improve privacy policies, user consent management, data processing compliance, and user rights protection [2] Group 1: Compliance Commitment - Six key application distribution platform companies committed to strict enforcement of app listing review standards and legal responsibilities [1] - The commitment emphasizes the importance of managing personal information collection and usage in compliance with the Personal Information Protection Law [1] Group 2: Privacy Policy and User Consent - Applications must provide accessible and long-term effective privacy policies, detailing personal information processing rules and user rights [2] - Operators are required to inform users about personal information processing in a clear manner, prohibiting default selections for consent [2] Group 3: Data Processing and User Rights - Operators must adhere to the principles of data minimization and necessity, avoiding blanket authorizations and frequent pop-up requests [2] - Users should be informed of their rights to access, copy, correct, delete, and restrict processing of their personal information, with a response time of 15 working days for requests [2]

Core Insights - The A-share market showed mixed performance on September 29, with the 5G Communication ETF (515050) experiencing a significant intraday rise, peaking over 2% before settling at a 1.77% increase by 10:08, with a trading volume of 160 million yuan [1] - The 5G Communication ETF has attracted substantial capital inflow, with over 360 million yuan net inflow in the past five days, bringing its total size to 9.577 billion yuan [1] - The ETF focuses on AI computing hardware and leading electronics companies, tracking the CSI 5G Communication Theme Index, with significant weightings in optical module CPO stocks (38%) and PCB circuit board stocks (14%) [1] - The top ten holdings of the ETF account for 62.27% of its total weight, including companies like Xinyiseng, Zhongji Xuchuang, and Lixun Precision [1] - The rapid development of AI is expected to drive unprecedented demand for computing power and data traffic, with Galaxy Securities projecting that the 5G sector will lead globally and that the integration of new and old driving forces will enhance productivity [1] - The steady advancement of 5G network construction is leading to an expanding base of gigabit users, improving operators' profitability and cash flow, which may result in performance exceeding expectations in the 5G + AI sector [1]

Core Viewpoint - The "Shenzhen Plan" introduces 15 clear guidelines for personal information protection, emphasizing privacy policy standardization, user consent management, data processing compliance, and user rights protection [2][3][4] Group 1: Privacy Policy Standardization - Application distribution platforms and apps must provide easily accessible and long-term effective privacy policies, including personal information processing rules, user rights, and complaint channels [2] - Specific rules must be outlined for the handling of minors' personal information [2] Group 2: User Consent Management - Operators must inform users of personal information processing in a prominent manner, prohibiting default selections or bundled authorizations [3] - Sensitive personal information requires "separate consent," and users must have effective means to withdraw consent [3] Group 3: Data Processing Compliance - Operators must adhere to the principles of "minimum and necessary" data processing, avoiding blanket authorizations and frequent pop-up requests [3] - Personalized recommendations must offer non-targeted options or easy refusal methods, and generative AI services must not misuse personal information [3] Group 4: User Rights Protection - Operators are required to inform users of their rights to access, copy, correct, delete, and restrict processing of their personal information, with a commitment to respond to user requests within 15 working days [3] - Barriers to exercising these rights must not be artificially created [3] Group 5: Industry Commitment and Regulatory Framework - Six major application software distribution platform representatives signed a compliance operation commitment to strengthen personal information protection [4] - Since 2021, significant laws such as the Data Security Law and Personal Information Protection Law have been enacted, establishing a solid legal foundation for data security and personal information protection [4] - The Shenzhen Municipal Cyberspace Administration has been actively promoting a multi-governance model involving government regulation, corporate autonomy, industry self-discipline, and social oversight [4][5]