Investment Rating - The report maintains a "Buy" rating for the company, with a target price not specified [6]. Core Views - The company reported a revenue of 1,005.2 billion yuan for Q3 2025, representing a year-on-year growth of 11.6%, but the net profit attributable to shareholders decreased by 32.69% to 53.2 billion yuan [1]. - The operator business faced pressure, leading to a significant decline in profits, with a Q3 net profit of 2.64 billion yuan, down 87.84% year-on-year [2]. - The company is expanding its server business, achieving a 180% year-on-year growth in computing revenue, with server and storage revenue increasing by 250% [3]. - The company has developed core switching chip capabilities, achieving a key chip forwarding capacity of 12.8T, with plans to upgrade to 51.2T [4]. - The company is integrating AI into its operations, enhancing its "connection + computing" strategy, and expanding in both computing and terminal sectors [5]. - Profit forecasts for 2025-2027 have been adjusted to 73 billion, 83 billion, and 92 billion yuan respectively, with corresponding PE ratios of 28, 25, and 22 [6]. Summary by Sections Financial Performance - In Q3 2025, the company achieved an operating income of 289.67 billion yuan, a year-on-year increase of 5.11%, but a quarter-on-quarter decline of 24.93% [2]. - The gross profit margin for Q3 was 25.85%, down 14.5 percentage points year-on-year, primarily due to a decrease in the high-margin operator business [2]. - The company’s inventory increased to 461 billion yuan by the end of Q3, up from 420.6 billion yuan at mid-year [2]. Business Expansion - The computing revenue accounted for 25% of total revenue, with significant contributions from major internet and financial companies [3]. - The company is actively promoting AI applications in consumer and family scenarios, launching innovative AI-enabled products [5]. Investment Outlook - The report suggests that the company's strategy of deepening "connection + computing" is expected to create a second growth curve, despite current pressures on the operator business [6].

Investment Rating - The investment rating for the company is "Buy" and is maintained [8] Core Insights - The company is firmly advancing its "Connection + Computing Power" transformation strategy, with a stable foundation in connection business and a significant increase in computing power business, which has driven revenue growth of 180% year-on-year, accounting for approximately 25% of total revenue [5][12] - The company has shown effective cost control, with an increase in the proportion of government and enterprise business, although there are structural fluctuations in gross margin and a phase adjustment in profitability [12] - Strong R&D investment continues to enhance the company's full-stack intelligent computing capabilities [12] Summary by Sections Financial Performance - For the first three quarters of 2025, the company achieved operating revenue of 100.52 billion yuan, a year-on-year increase of 11.6%, and a net profit attributable to shareholders of 5.32 billion yuan, a decrease of 32.7% year-on-year [5] - In Q3 alone, the company reported operating revenue of 28.97 billion yuan, a year-on-year increase of 5.1% but a quarter-on-quarter decrease of 24.9%, with a net profit of 260 million yuan, down 87.8% year-on-year and 89.8% quarter-on-quarter [5] Business Segments - The computing power business has seen a year-on-year revenue increase of 180%, becoming a core growth driver, with server and storage revenue growing by 250% and data center products by 120% [12] - The government and enterprise business has continued to expand rapidly, with a year-on-year increase of 130% [12] Cost Management - The gross margin for Q3 was 25.9%, down 14.5 percentage points year-on-year and 5.0 percentage points quarter-on-quarter, primarily due to the rapid growth of lower-margin government and enterprise business [12] - The company has effectively managed expenses, with an expense ratio of 9.7% for the first three quarters, a decrease of 0.8 percentage points year-on-year [12] R&D Investment - The company has maintained high R&D investment, with R&D expenses of 17.81 billion yuan for the first three quarters, accounting for approximately 18% of revenue [12] - The company has made significant advancements in AI infrastructure and core technology breakthroughs, enhancing its competitive edge in the market [12] Profit Forecast - The company forecasts net profits attributable to shareholders for 2025-2027 to be 8.578 billion yuan, 9.396 billion yuan, and 10.556 billion yuan, corresponding to year-on-year growth rates of 2.0%, 9.5%, and 12.3% respectively [12]

Core Viewpoint - ZTE Corporation (000063)(00763) experienced a decline of over 5% in intraday trading, currently down 4.71% at HKD 39.62, with a trading volume of HKD 1.701 billion. The company is set to hold a board meeting to approve its Q3 results for the nine months ending September 30, 2025. [1] Group 1 - ZTE is a leading domestic telecommunications equipment company actively transitioning from "connectivity" to "connectivity + computing power." [1] - Huatai Securities' recent report highlights two key reasons for optimism regarding ZTE: the company's solid fundamentals and its ability to maintain a high market share in collective procurement despite a decline in traditional network capital expenditure from domestic operators. [1] - ZTE's overseas business expansion is effectively alleviating the downturn in domestic demand. [1] Group 2 - The company's forward-looking layout in computing power is expected to yield results, as ZTE has fully entered the AI computing power sector, covering computing, storage, and networking products. [1] - ZTE possesses comprehensive self-research capabilities from chips to complete machines, making its position in the domestic computing power chain unique. [1] - With the mass introduction of self-developed chips into ICT equipment, ZTE's profitability in government and enterprise business is anticipated to improve significantly. [1]

Investment Rating - The report maintains a "Buy" rating for both A-shares and H-shares of the company, with target prices set at RMB 70.90 and HKD 54.34 respectively [5]. Core Insights - The company is transitioning from a "connectivity" focus to a "connectivity + computing power" strategy, which is expected to yield significant benefits as it has established a comprehensive AI computing power layout, including self-developed chips [1][2]. - The company has a solid foundation despite a decline in traditional network capital expenditure from domestic operators, with a high market share in collective procurement and strong profitability [1][2]. - The company has achieved rapid growth in its server and storage business, with a year-on-year revenue increase exceeding 200% in the first half of 2025 [2][14]. Summary by Sections Business Overview - The company operates in three main segments: carrier networks, government and enterprise, and consumer business, with respective revenue contributions of 49%, 27%, and 24% in the first half of 2025 [2][11]. - The carrier network segment is stabilizing after a decline, while the government and enterprise segments have returned to rapid growth [2][14]. Key Transformations - The company has shifted its strategy since 2020 to include computing power as a second growth curve, focusing on products such as servers, storage, and AI applications [36][64]. - The company has established a full-stack computing power layout, making it one of the few domestic companies to achieve this [2][39]. Financial Projections and Valuation - The company is expected to see significant improvements in profitability as self-developed computing power chips are introduced to ICT equipment, with projected net profits of RMB 84.89 billion, RMB 94.20 billion, and RMB 104.18 billion for 2025-2027 [4][9]. - The report maintains its earnings forecasts and valuation metrics, with a projected PE ratio of 36x for A-shares in 2026 [4][9]. Product Development - The company has developed over 150 products in the computing power sector, including advanced switching chips and DPU chips, which are expected to support its ICT equipment [3][39]. - The company is actively expanding its product offerings in servers, storage, and data centers, with a focus on high-performance and cost-effective solutions [39][59].

Core Viewpoint - ZTE Corporation is a leading global provider of integrated information and communication technology solutions, accelerating its transformation towards "connectivity + computing power" as 5G network construction enters a platform phase [1] Financial Performance - In the first half of 2025, the company achieved revenue of 71.553 billion yuan, representing a year-on-year increase of 14.51% [1] - The revenue from government and enterprise business, particularly in servers and storage products, doubled [1] Growth Potential - The company's performance is expected to return to a growth trajectory, supported by its position as the fourth largest telecommunications equipment supplier globally [1] - The operator network business remains stable, while the computing power and terminal business is showing significant results as a second growth curve [1] Technology Development - The company has self-developed and reserved core underlying technologies, which enhances its competitive edge in the market [1] - The report initiates coverage of the company with a "buy" rating [1]

Core Viewpoint - ZTE Corporation reported a net profit attributable to shareholders of 5.06 billion yuan for the first half of 2025, a year-on-year decline of 11.77% [1] - The company is focusing on expanding its second growth curve through computing and terminal products, which saw nearly 100% year-on-year revenue growth, accounting for over 35% of total revenue [1] Financial Performance - In Q2 2025, the net profit attributable to shareholders was 2.604 billion yuan, down 12.94% year-on-year [1] - Revenue from the carrier network business was 35.06 billion yuan, down 5.99% year-on-year; revenue from the government and enterprise business was 19.25 billion yuan, up 109.93% year-on-year; and revenue from consumer business was 17.23 billion yuan, up 7.59% year-on-year [1] Business Segments - The government and enterprise business showed significant growth momentum, with a revenue increase of over 100% [1] - Revenue from servers and storage grew by over 200%, with AI server revenue accounting for 55% of this segment [1] Strategic Initiatives - The company has recently won a bid for AI general computing devices from China Mobile, securing the largest share of the total procurement [1] - The shift in business structure and the impact of the "connectivity + computing" strategy are expected to lead to sustained breakthroughs in the second growth curve [1] Profit Forecast - The net profit forecasts for 2025-2027 have been adjusted to 8.5 billion, 9.3 billion, and 10.2 billion yuan respectively, down from previous estimates of 9.2 billion, 10.5 billion, and 11.8 billion yuan [1] - Corresponding PE valuations for 2025-2027 are projected to be 25, 23, and 21 times [1]

Investment Rating - The report maintains a "Buy" rating for ZTE Corporation (000063) with a target price not specified [6]. Core Views - ZTE Corporation's revenue for the first half of 2025 reached 71.55 billion yuan, representing a year-on-year growth of 14.5%, while the net profit attributable to shareholders decreased by 11.77% to 5.06 billion yuan [1]. - In Q2 2025, the company achieved a revenue of 38.59 billion yuan, a significant year-on-year increase of 20.92%, with notable growth in the government and enterprise business segment, which saw a 109.93% increase [2]. - The company's strategy of "Connection + Computing Power" is yielding results, with revenue from computing power and terminal products nearly doubling year-on-year, accounting for over 35% of total revenue [3][5]. Summary by Sections Financial Performance - For the first half of 2025, ZTE's revenue was 71.55 billion yuan, with a net profit of 5.06 billion yuan, reflecting a decline in profitability [1]. - The second quarter of 2025 showed a revenue of 38.59 billion yuan, with a net profit of 2.60 billion yuan, indicating a decline of 12.94% year-on-year [2]. - The company anticipates a net profit of 8.5 billion yuan for 2025, with projected earnings per share (EPS) of 1.77 yuan [6]. Business Segments - The revenue breakdown for Q2 2025 includes 35.06 billion yuan from carrier networks (down 5.99% year-on-year), 19.25 billion yuan from government and enterprise (up 109.93%), and 17.23 billion yuan from consumer business (up 7.59%) [2]. - The computing power segment, including servers and storage, saw over 200% growth, with AI servers making up 55% of this revenue [3]. Strategic Initiatives - ZTE is enhancing its core switching chip capabilities, aiming to upgrade from 12.8T to 51.2T forwarding capacity [4]. - The company is actively expanding its AI-driven solutions, including self-developed chips and integrated computing products, to support the growth of intelligent computing centers and consumer applications [5]. - ZTE's "AI Together" initiative aims to enhance collaboration among AI models, with new product launches such as the Nubia Z70S Ultra and Nubia Flip 2 [5].

Core Insights - ZTE Corporation ranks second in the "Top 100 Innovative Large Enterprises in China 2025" with a score of 86.74, reflecting its strategic transformation and technological reinvention in the AI era [1][3]. Group 1: Strategic Transformation - ZTE is shifting from being a traditional communication equipment supplier to a "connection + computing" player, aiming to leverage AI and computing power for growth [4][5]. - The company has reported a 14.5% year-on-year revenue growth in the first half of 2025, with its computing and terminal businesses growing nearly 100%, now accounting for over one-third of total revenue [4][9]. Group 2: Technological Advancements - ZTE has developed a comprehensive self-research system covering computing processors, network processors, and AI switching chips, enhancing its technological foundation for intelligent computing clusters [5][8]. - The introduction of ultra-node solutions based on self-developed AI switching chips has achieved GPU intercommunication bandwidths of 400GB/s to 1.6TB/s, showcasing ZTE's technological capabilities [5][6]. Group 3: Market Performance - In the first half of 2025, ZTE's overall revenue reached 71.55 billion yuan, with the enterprise business segment showing explosive growth, increasing by 109.9% year-on-year [9][10]. - The AI server segment has become a significant contributor, with ZTE winning the largest share in a major procurement project for AI computing devices by China Mobile [9][10]. Group 4: R&D and Innovation - ZTE's R&D expenses reached 12.66 billion yuan in the first half of 2025, accounting for approximately 18% of its revenue, supporting AI technology development and product innovation [13][14]. - The company holds around 94,000 patent applications, with over 50% related to AI, establishing a strong technological barrier in key areas such as intelligent computing chips and AI algorithms [13][14]. Group 5: International Expansion - ZTE's overseas revenue reached 20.94 billion yuan in the first half of 2025, marking a 7.8% year-on-year increase, indicating its growing international market presence [11][12]. - The company is focusing on data centers and intelligent computing infrastructure in international markets, covering regions such as Europe, Latin America, and the Middle East [11][12].

Core Insights - ZTE Corporation has embraced an AI-driven core strategy, leading to its recognition as one of China's top 100 innovative enterprises, ranking second with a score of 86.74 [2][3] Group 1: Innovation Ranking - On September 15, the China Enterprise Confederation and the China Entrepreneur Association released the "Top 100 Innovative Enterprises in China," with Huawei at the top and ZTE in second place [2] - The ranking criteria included a minimum of 100 invention patents, a research intensity of over 0.6%, and revenue exceeding 20 billion yuan [2] Group 2: Business Transformation and Performance - ZTE's revenue for the first half of 2025 reached 71.55 billion yuan, a year-on-year increase of 14.5%, with a net profit of 5.06 billion yuan [3] - The second curve business, represented by computing and terminal products, saw nearly 100% revenue growth, accounting for over 35% of total revenue [3] - The company’s AI strategy is entering a phase of performance realization, with significant growth in its AI-related business segments [3] Group 3: Strategic Focus - ZTE is focusing on three main areas related to AI: building AI-native ICT infrastructure, empowering AI application proliferation, and enhancing AI applications for personal and home use [4] - The company has established a comprehensive AI product ecosystem, covering various technologies and solutions from microelectronics to telecommunications [4] Group 4: R&D Investment - ZTE plans to leverage opportunities in AI across four dimensions: communication infrastructure, computing infrastructure, industry applications, and edge AI [5] - The company has committed to high levels of R&D investment, with 24.03 billion yuan allocated in 2024, representing about 20% of its revenue [5] - As of now, ZTE holds approximately 94,000 global patent applications, with nearly 5,500 related to AI [5] Group 5: Industry Recognition and Future Outlook - ZTE has received industry accolades, including the SAIL Award at the 2025 World Artificial Intelligence Conference [6] - The company anticipates that AI will reshape industry paradigms and create significant economic opportunities, aiming to enhance its AI capabilities and contribute to high-quality economic development [6] - The global AI market is projected to exceed $860 billion in the next five years, with a compound annual growth rate of 32.19% [6]

Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Insights - The company's revenue returned to growth in 25H1, driven by a doubling of government and enterprise business under the influence of the AI wave, becoming the core engine for performance [2][6] - Despite a short-term adjustment in gross margin due to changes in business structure, effective cost control has maintained the company's profitability [2] - The company is firmly executing its "Connection + Computing Power" strategy, with strong momentum exhibited in its second growth curve, represented by computing power businesses such as servers and switches, and terminal businesses like AI smartphones and cloud computers [2][6] Summary by Sections Revenue and Profitability - In 25H1, the company achieved revenue of 71.55 billion yuan, a year-on-year increase of 14.5%, while net profit attributable to shareholders was 5.06 billion yuan, down 11.8% year-on-year [6] - In 25Q2, revenue reached 38.58 billion yuan, up 20.9% year-on-year and 17.0% quarter-on-quarter, with net profit of 2.60 billion yuan, down 12.9% year-on-year but up 6.2% quarter-on-quarter [6] Business Performance - The government and enterprise business saw a remarkable performance, with revenue of 19.25 billion yuan in 25H1, a year-on-year increase of 109.9% and a quarter-on-quarter increase of 105.0%, accounting for 26.9% of total revenue, up 14.1 percentage points year-on-year [2][6] - The company capitalized on opportunities in the domestic market, particularly in the financial and power sectors, leading to significant growth in server and storage revenue [2] - The operator network business revenue increased by 5.99% year-on-year, while consumer business revenue grew by 7.6% year-on-year [2] Cost Management and Margins - The gross margin for 25H1 was 32.5%, down 8.0 percentage points year-on-year, primarily due to the increased proportion of lower-margin government and enterprise business [2] - The company effectively controlled expenses, with R&D, sales, and management expense ratios at 6.1%, 3.0%, and 17.7%, respectively, showing year-on-year reductions [2] Strategic Development - The "Connection + Computing Power" strategy is deepening, with significant achievements in the computing power sector, including large-scale sales of server and storage products to leading internet companies [2] - The company launched AI-integrated smartphones and maintained a leading position in the global market for smart home devices and cloud computers [2] Profit Forecast and Investment Advice - The company is expected to achieve net profits of 8.73 billion yuan, 9.13 billion yuan, and 9.72 billion yuan for 2025-2027, with corresponding year-on-year growth rates of 3.8%, 4.6%, and 6.5% [2][6] - The report maintains a "Buy" rating based on the company's strong performance and strategic direction [2][9]