ZTE(000063) 招银国际·2024-08-19 06:31Investment Rating - The report maintains a "BUY" rating for ZTE, with an adjusted target price of RMB32.86, reflecting a potential upside of 26.2% from the current price of RMB26.04 [2][3]. Core Insights - ZTE reported mixed results for 1H24, with revenue increasing by 2.9% YoY to RMB62.5 billion and net profit growing by 4.8% YoY to RMB5.7 billion. The carrier business faced challenges due to declining capex from domestic telecom companies, while non-carrier segments showed strong growth [2][3]. - The carrier segment's revenue fell by 8.6% YoY to RMB37.3 billion, primarily due to reduced spending from domestic telecoms as the 5G network build-out reached significant milestones. However, the gross profit margin (GPM) for the carrier segment remained robust at 54.3% [2][3]. - Non-carrier businesses, particularly in consumer and government/enterprise segments, experienced double-digit growth, with increases of 14.3% and 56.1% YoY, respectively. This growth was driven by strong demand in the FTTR market and recovering consumer electronics demand [2][3]. Financial Summary - For FY24E, revenue is projected at RMB130.034 billion, reflecting a 4.7% YoY growth, while net profit is expected to reach RMB10.478 billion, a 12.4% increase YoY. The gross margin is anticipated to be 39.8% [3][6]. - The report revises down revenue forecasts by 3% for FY24 and 2% for FY25 due to ongoing headwinds in the domestic telecom market, particularly in the RAN business. Net profit forecasts were also trimmed by 3% for FY24 and 7% for FY25, although this was partially offset by improved operating efficiency [2][6]. - The earnings summary indicates a stable GPM of 40.5% in 1H24, compared to 41.5% in FY23, while the net profit margin (NPM) improved to 9.4% in 2Q24 [2][3][6].