Zhi Tong Cai Jing·2025-10-30 11:29Core Viewpoint - The report from Jefferies indicates that ZTE Corporation (00763) is overvalued, maintaining a "Underperform" rating after a 100% increase in stock price, with a projected P/E ratio of 24 times for 2025 and a negative CAGR of -6.5% for earnings per share [1] Financial Performance - ZTE's Q3 2025 revenue, core operating profit, and net profit showed year-on-year growth of 5%, but declines of 115% and 88% respectively, significantly missing market expectations [1] - Gross margin fell from 40% to 26% year-on-year, leading to a 33% decline in gross profit, attributed to delays in telecom equipment delivery and weak telecom demand [1] Market Consensus and Projections - Jefferies' net profit forecasts for 2026 and 2027 are 35% and 48% lower than market consensus, respectively [1] - The firm anticipates that high-margin telecom revenues may experience double-digit declines in 2025 due to further capital expenditure cuts by Chinese telecom operators [1] Valuation Adjustments - The target price for ZTE has been reduced from HKD 27.27 to HKD 25.71 [1] - There is a risk of valuation downgrades as investor optimism regarding new business ventures is unlikely to materialize [1]