Core Viewpoint - ZTE Corporation aims to exceed 100 million units in annual shipments of home terminals by 2025, maintaining the number one global market share for five consecutive years [1] Group 1 - ZTE's target for home terminal shipments is set at over 100 million units annually by 2025 [1] - The company has achieved the number one global market share in the home terminal sector for five consecutive years [1]

Group 1 - The core viewpoint of the article highlights that ZTE Corporation aims to exceed 100 million units in annual shipments of home terminals by 2025, maintaining its position as the global market leader for five consecutive years [1] Group 2 - ZTE's strategy focuses on expanding its market share in the home terminal segment, which has shown consistent growth and demand [1] - The company has successfully achieved the number one global market share in this sector for the past five years, indicating strong competitive advantages and brand recognition [1]

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage, with expectations of growth driven by AI and computing power initiatives [5][8]. Core Insights - The company is positioned as a global leader in integrated information and communication technology solutions, with a stable market share in the telecommunications equipment sector [7][11]. - The company is transitioning towards a "connectivity + computing power" model, capitalizing on the demand for AI infrastructure and services [11][60]. - The report highlights the company's strong performance in the first half of 2025, with revenue reaching 71.55 billion yuan, a year-on-year increase of 14.51%, driven by significant growth in its government and enterprise business [7][26]. Summary by Sections Market Performance - The company's closing price is 45.80 yuan, with a total market capitalization of approximately 219.09 billion yuan [3]. Financial Forecast and Valuation - Projected revenues for 2023 to 2027 show a slight decline in 2024, followed by a recovery with expected growth rates of 14.16%, 13.11%, and 11.35% in subsequent years [6][63]. - The estimated net profit for 2025 is 8.38 billion yuan, with a corresponding PE ratio of 26.14 [6][63]. Business Segments - The company operates in three main segments: operator networks, government and enterprise, and consumer business, with a focus on enhancing its AI capabilities across these areas [18][60]. - The operator network business remains a cash cow with a gross margin of 52.94%, while the government and enterprise segment is experiencing rapid growth, with a projected revenue increase of 80% in 2025 [28][60]. Strategic Initiatives - The company is investing heavily in R&D, with a cumulative expenditure of 117.07 billion yuan from 2019 to 2024, focusing on servers, switches, terminals, and chips [28][60]. - The introduction of self-developed chips, including the "Zhu Feng" series CPU and "Ding Hai" DPU, is expected to enhance the company's competitive edge in AI and computing power [54][57]. Competitive Position - The company ranks fourth globally in the telecommunications equipment market, with a market share of 11% in 2023, indicating a solid competitive position [7][11]. - The report compares the company's valuation favorably against peers, with a 2025 PE average of 39.58 for comparable companies [8][64].

Core Viewpoint - ZTE Corporation's stock fell over 6% following the release of its interim results, indicating market concerns over declining profits despite revenue growth [1] Financial Performance - ZTE reported a revenue of 71.553 billion yuan for the first half of the year, representing a year-on-year increase of 14.51% [1] - The net profit for the same period was 5.058 billion yuan, showing a year-on-year decline of 11.77% [1] - The non-GAAP net profit was 4.104 billion yuan, down 17.32% year-on-year [1] - Gross margin stood at 32.45%, a decrease of 7.99% compared to the previous year [1] - The net cash flow from operating activities was 1.3 billion yuan, reflecting a significant decline of 81.44% year-on-year [1] Segment Performance - Revenue from operator networks was 35.064 billion yuan, a decrease of 5.99% year-on-year, with a gross margin of 52.94%, down 1.38 percentage points [1] - Government and enterprise business revenue reached 19.254 billion yuan, a substantial increase of 109.93% year-on-year, but with a gross margin of 8.27%, down 13.50 percentage points [1] - Consumer business revenue was 17.235 billion yuan, up 7.59% year-on-year, with a gross margin of 17.78%, down 1.03 percentage points [1]

Core Viewpoint - ZTE Corporation (00763) experienced a decline of over 6% following the release of its interim results, with a current share price of HKD 36.22 and a trading volume of HKD 580 million [1] Financial Performance - For the first half of the year, ZTE reported revenue of CNY 71.553 billion, representing a year-on-year increase of 14.51% [1] - The net profit for the same period was CNY 5.058 billion, showing a year-on-year decrease of 11.77% [1] - The non-recurring net profit was CNY 4.104 billion, down 17.32% year-on-year [1] - The gross profit margin stood at 32.45%, a decline of 7.99% compared to the previous year [1] - The net cash flow from operating activities was CNY 1.3 billion, a significant drop of 81.44% year-on-year [1] Segment Performance - Revenue from operator networks was CNY 35.064 billion, a decrease of 5.99% year-on-year, with a gross margin of 52.94%, down 1.38 percentage points [1] - Revenue from government and enterprise business reached CNY 19.254 billion, marking a substantial increase of 109.93% year-on-year, although the gross margin fell to 8.27%, down 13.50 percentage points [1] - Consumer business revenue was CNY 17.235 billion, up 7.59% year-on-year, with a gross margin of 17.78%, a decrease of 1.03 percentage points [1]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3] Core Views - The company is a global leader in integrated information and communication technology solutions, focusing on operator networks, government and enterprise business, and consumer business [15][21] - The company's revenue for 2024 is projected at 121.299 billion yuan, a year-on-year decrease of 2.38%, with a net profit of 8.425 billion yuan, down 9.66% [21] - The core competitiveness of the connectivity business continues to improve, with an optimized market structure [3][28] Summary by Sections Company Overview - The company provides end-to-end ICT solutions and serves over a quarter of the global population across more than 160 countries [15] - The business is divided into three main segments: operator networks, government and enterprise, and consumer business [16] Operator Network Business - The operator network business is divided into traditional networks and computing networks, with a focus on 5G-A and 50G PON technologies [17][18] - The company has achieved significant market share in both domestic and international markets, particularly in wireless and fixed-line products [17] Government and Enterprise Business - The government and enterprise segment has seen revenue growth driven by digital transformation and innovation in sectors like finance and internet [19] - The company is expanding its international presence, particularly in Asia and Latin America [19] Consumer Business - The consumer segment includes home terminals, mobile devices, and cloud computers, with significant growth in FTTR products and mobile internet [20] - The company has launched innovative products and expanded its market presence internationally [20] Financial Performance - The company’s revenue has grown from 81.471 billion yuan in 2014 to 121.299 billion yuan in 2024, with a compound annual growth rate of approximately 4.06% [21] - The net profit has increased from 2.634 billion yuan in 2014 to 8.425 billion yuan in 2024, with a compound annual growth rate of 12.33% [21] Revenue Composition - In 2024, the operator network business accounted for 57.98% of total revenue, while government and enterprise business and consumer business accounted for 15.31% and 26.72%, respectively [25][28] - Domestic revenue constituted 67.61% of total revenue, with international revenue at 32.39% [35] Profitability Metrics - The overall gross margin for 2024 is projected at 37.91%, a decrease of 3.57 percentage points year-on-year [39] - The company has effectively controlled its overall expense ratio, which has decreased from 15.22% in 2018 to 10.81% in 2024 [42] Future Outlook - The company is well-positioned to capitalize on major opportunities in 5G, new infrastructure, digital transformation, and the dual-carbon economy [3] - Future net profits are projected to grow steadily from 8.777 billion yuan in 2025 to 10.394 billion yuan in 2027 [3]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected increase of over 15% relative to the CSI 300 index within the next six months [21]. Core Views - The company is transitioning towards a "Connection + Computing Power" model as operator network revenues face pressure, with a focus on ICT solutions for telecom operators and enterprise clients [8][12]. - In 2024, the company reported a revenue of 121.3 billion yuan, a decrease of 2.38% year-on-year, and a net profit of 8.43 billion yuan, down 9.66% year-on-year [5]. - The company is enhancing its market share in the enterprise and consumer sectors, with revenue contributions from operator networks, enterprise business, and consumer business at 58.0%, 15.3%, and 26.7% respectively [8]. Summary by Sections Financial Performance - In Q4 2024, the company achieved a revenue of 31.25 billion yuan, a decline of 10.34% year-on-year, with a net profit of 518 million yuan, down 65.08% year-on-year [5]. - The domestic market revenue was 82.01 billion yuan, a decrease of 5.18%, while international market revenue reached 39.29 billion yuan, an increase of 4.04% [8]. Business Structure - The company is gradually shifting its business structure towards enterprise and consumer markets, with a notable increase in revenue from the enterprise sector [8]. - The company is focusing on AI solutions, providing comprehensive computing power solutions across various sectors, which is expected to enhance its market position [8]. Market Position - The company maintains a stable market share in traditional operator networks, with core wireless and wired products showing resilience [9]. - In the enterprise market, the company reported a revenue of 18.57 billion yuan, a growth of 36.68% year-on-year, driven by increased demand for servers and storage solutions [10]. Future Outlook - The company is expected to see a recovery in net profit, with projections of 8.85 billion yuan, 9.33 billion yuan, and 9.90 billion yuan for 2025, 2026, and 2027 respectively [12]. - The ongoing development of domestic computing power infrastructure is anticipated to provide new growth opportunities for the company's server and switch businesses [12].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected increase of over 15% relative to the CSI 300 index within the next six months [21]. Core Views - The company is transitioning towards a "Connection + Computing Power" model as operator network revenues face pressure, with a focus on ICT solutions for telecom operators and enterprise clients [8][12]. - In 2024, the company reported a revenue of 121.3 billion yuan, a decrease of 2.38% year-on-year, and a net profit of 8.4 billion yuan, down 9.66% year-on-year [5]. - The company is enhancing its market share in the enterprise and consumer sectors, with revenue contributions from operator networks, enterprise business, and consumer business at 58.0%, 15.3%, and 26.7% respectively [8]. Summary by Sections Financial Performance - In Q4 2024, the company achieved a revenue of 31.25 billion yuan, a decline of 10.34% year-on-year, with a net profit of 518 million yuan, down 65.08% year-on-year [5]. - The domestic market revenue was 82.01 billion yuan, a decrease of 5.18%, while international market revenue reached 39.29 billion yuan, an increase of 4.04% [8]. Business Structure and Market Position - The company is shifting its business structure towards enterprise and consumer markets, with a steady increase in market share [8]. - The operator network revenue was 70.33 billion yuan, down 15.02%, while the gross margin improved to 50.90% [9]. Growth Opportunities - The enterprise business revenue grew by 36.68% year-on-year to 18.57 billion yuan, driven by increased demand for servers and storage solutions [10]. - The consumer business revenue increased by 16.12% year-on-year to 32.41 billion yuan, supported by the growth of smart home applications and AI-enabled devices [10]. Future Projections - The company expects net profits of 8.85 billion yuan, 9.33 billion yuan, and 9.90 billion yuan for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 20.16X, 19.10X, and 18.01X [12].

Investment Rating - The investment rating for the company is "Outperform the Market" [6][4]. Core Views - The company is undergoing a structural adjustment in revenue for 2024, with a focus on "computing power + connectivity" [4][10]. - Revenue for 2024 is projected at 121.299 billion yuan, a decrease of 2.38%, with a net profit of 8.425 billion yuan, down 9.66% year-on-year [10][4]. - The company plans to distribute a cash dividend of 6.17 yuan per 10 shares to all shareholders [10]. Revenue Structure Adjustment - The ICT industry is experiencing structural changes due to adjustments in investment, leading to revenue pressure for the company [2]. - The company's operator network revenue is expected to be 70.3 billion yuan in 2024, a decrease of 15.02% year-on-year [2]. - The company is increasing R&D investment in the government and enterprise market, with expected revenue of 18.6 billion yuan in 2024, a growth of 36.68% year-on-year [2]. - Consumer business revenue is projected to grow by 16.1% year-on-year, driven by AI opportunities and a strong performance in mobile products, which saw revenue growth of over 40% [2]. Financial Performance and Cost Management - The overall gross margin for 2024 is expected to be 37.91%, down 3.57 percentage points year-on-year, primarily due to the increased revenue share of lower-margin server products [2][14]. - The company has effectively managed costs, with R&D, sales, and management expense ratios decreasing by 0.54%, 0.81%, and 0.84% respectively [3][14]. - The company is focusing on key projects to enhance operational efficiency [3]. Future Outlook - For 2025, the company aims to continue leveraging "computing power + connectivity" to expand its computing and mobile business [4][19]. - The company is pushing for a diversified domestic intelligent computing ecosystem and plans to enhance its AI mobile product offerings [17][19]. - The profit forecast for 2025 is adjusted to a net profit of 8.884 billion yuan, with corresponding PE ratios of 20.8X [4][21].