Core Viewpoint - ZTE Corporation focuses on breakthroughs in core technologies related to connectivity (CT technology) and computing power (IT technology), enhancing its core competitiveness through innovation in 5G, optical networks, computing power, terminals, and value patent layout [1] Group 1: Core Technology Development - The company emphasizes independent innovation in core technologies such as chips, operating systems, and databases, showcasing industry-leading capabilities in chip design, real-time operating systems, and its self-developed GoldenDB database, which handles over 10 trillion financial transactions daily [1] - ZTE's new server operating system and GoldenDB distributed database have passed national security assessments, reinforcing its commitment to secure technology [1] Group 2: Connectivity Solutions - In the connectivity sector, ZTE ranks second globally in cumulative shipments of 5G base stations and core networks, with its fixed network products also holding a global second-place market share [1] - The company has developed specialized product solutions for various 5G scenarios, enhancing network quality and supporting the evolution towards 6G technology [1] Group 3: Computing Power Initiatives - ZTE is enhancing its intelligent computing product development and ecosystem collaboration, focusing on AI-driven solutions through self-developed chips and large-scale computing infrastructure [1] - The company has received accolades for its innovations in distributed optical interconnect chips and AI supernode systems, demonstrating its leadership in AI computing solutions [1] Group 4: Terminal Products - ZTE is actively promoting AI applications in consumer electronics, expanding its ecosystem across smartphones, PCs, tablets, and smart wearable devices [1] - The company has achieved significant sales milestones, including over 10 million FTTR units and leading global market shares in various terminal categories [1] Group 5: Patent Strategy - ZTE ranks among the top global players in patent layout, with approximately 94,000 global patent applications and over 50,000 granted patents as of June 30, 2025 [1] - The company is a major contributor to 5G technology research and standard-setting, maintaining a strong position in essential patent families [1]

Core Viewpoint - The article highlights the evolution of ZTE Corporation from its inception to becoming a major player in the telecommunications industry, emphasizing its commitment to independent research and development, and its strategic pivot towards AI technology as a core component of its future growth [1][2][46]. Group 1: Historical Development - In 1985, ZTE was established as a joint venture in Shenzhen, initially struggling with low-profit assembly orders, leading to a shift towards independent R&D [1]. - By 1989, ZTE developed its first digital switching system with independent intellectual property rights, marking a significant technological milestone [1]. - Over the past 40 years, ZTE has transformed from a small assembly workshop into the second-largest telecommunications equipment manufacturer in China, achieving revenues exceeding 121.3 billion yuan in 2024 [1][2]. Group 2: AI Strategy - ZTE has identified "full-domain AI" as a crucial part of its development strategy, integrating AI technology with ICT infrastructure to enhance operational efficiency and drive growth [11][14]. - The company has committed significant resources to AI, with a focus on developing comprehensive AI solutions that encompass cloud, network, edge, and terminal technologies [14][16]. - ZTE's investment in R&D reached 24.03 billion yuan in 2024, accounting for approximately 20% of its revenue, with a total R&D expenditure of 117.07 billion yuan over six years [20][22]. Group 3: Manufacturing and Innovation - ZTE operates its own manufacturing facilities, such as the Nanjing smart factory, which has achieved a 41% increase in total output value and a 29% reduction in carbon emissions through smart manufacturing practices [39][40]. - The Nanjing factory is recognized as China's first five-star 5G factory, showcasing the integration of 5G technology in manufacturing processes [35][36]. - ZTE's manufacturing strategy emphasizes automation and smart technology, aiming for a significant portion of its production to operate in "dark factory" mode, where minimal human intervention is required [40][42]. Group 4: Future Outlook - ZTE aims to leverage AI to redefine user experiences in mobile technology, with a focus on creating AI-enabled smartphones that enhance user interaction and functionality [24][27]. - The company is positioned to capitalize on the growing demand for AI applications across various industries, aligning with national initiatives to promote technological innovation [13][46]. - ZTE's long-term vision includes a commitment to sustainable growth through continuous investment in technology and innovation, contributing to the broader goal of national technological advancement [46].

Investment Rating - The report maintains a "Buy" rating for ZTE Corporation (000063) with a target price not specified [9]. Core Views - ZTE Corporation reported a revenue of 121.3 billion yuan for 2024, a year-on-year decline of 2.38%, and a net profit attributable to shareholders of 8.42 billion yuan, down 9.66% year-on-year [1]. - The company is facing pressure in its operator business but is experiencing rapid growth in consumer and government enterprise sectors, driven by AI integration and a shift towards "connection + computing" strategies [2][3]. Summary by Sections Revenue Breakdown - Operator Business: Revenue of 70.33 billion yuan in 2024, down 15.02% year-on-year, primarily due to the overall investment environment for operators [2]. - Government Enterprise Business: Revenue of 18.57 billion yuan, up 36.68% year-on-year, with significant growth in sectors like internet and finance [2]. - Consumer Business: Revenue of 32.41 billion yuan, up 16.12% year-on-year, with over 40% growth in mobile phone product revenue [3]. Profitability Analysis - The overall gross margin for 2024 was 37.91%, a decrease of 3.57 percentage points year-on-year [4]. - The operator business gross margin was 50.90%, an increase of 1.79 percentage points, while the government enterprise business gross margin fell to 15.33%, down 19.58% year-on-year [4]. Cost Management - The net profit margin for 2024 was 6.89%, a decline of 0.55 percentage points year-on-year, with a reduction in expense ratios across various categories [5]. - R&D expenses reached 24.03 billion yuan, accounting for approximately 20% of revenue, with over 5,000 AI patent applications filed [5]. AI and Future Growth - The company is deeply integrating AI into its operations, focusing on building a diverse domestic intelligent computing ecosystem and expanding its product offerings in AI terminals [6][7]. - ZTE is actively participating in the construction of intelligent computing centers and enhancing its market competitiveness in AI-enabled products [6][7]. Financial Health - The asset-liability ratio has been decreasing, from 73.1% at the end of 2019 to 64.7% at the end of 2024, indicating improved financial stability [8]. - Operating cash flow for 2024 was 11.48 billion yuan, maintaining a positive net cash flow for 25 consecutive quarters [8]. Earnings Forecast - The forecast for net profit attributable to shareholders is adjusted to 9.2 billion yuan for 2025 and 10.5 billion yuan for 2026, with a projected PE ratio of 20/18/16 times for the respective years [9].

Investment Rating - The report maintains a "Buy" rating for ZTE Corporation (000063) with a target price not specified [9]. Core Views - ZTE Corporation's revenue for 2024 is reported at 121.3 billion yuan, a year-on-year decline of 2.38%, with a net profit attributable to shareholders of 8.42 billion yuan, down 9.66% year-on-year [1]. - The company is facing pressure in its operator business but is experiencing rapid growth in consumer and government enterprise sectors, driven by a strategic shift towards AI and computing power [2][3]. - The overall gross margin for 2024 is reported at 37.91%, a decrease of 3.57 percentage points year-on-year, influenced by the revenue structure and declining margins in the government enterprise business [4]. Summary by Sections Revenue Performance - Operator business revenue for 2024 is 70.33 billion yuan, down 15.02% year-on-year, primarily due to the overall investment environment for operators [2]. - Government enterprise business revenue reached 18.57 billion yuan, an increase of 36.68% year-on-year, with significant growth in domestic government enterprise revenue [2]. - Consumer business revenue is reported at 32.41 billion yuan, up 16.12% year-on-year, with strong sales in AI-enabled products [3]. Profitability Analysis - The gross margin for the operator network business is 50.90%, up 1.79 percentage points year-on-year, while the government enterprise business gross margin is 15.33%, down 19.58 percentage points [4]. - The net profit margin for 2024 is 6.89%, a decrease of 0.55 percentage points year-on-year, with a focus on controlling expenses [5]. Strategic Initiatives - ZTE is integrating AI into its operations, focusing on the "Connection + Computing Power" strategy, which is expected to drive growth in the ICT industry over the next 3-5 years [6]. - The company is expanding its AI product offerings, including AI smartphones and smart home devices, to enhance market competitiveness [7]. Financial Health - The asset-liability ratio has decreased from 73.1% at the end of 2019 to 64.7% at the end of 2024, indicating improved financial stability [8]. - Operating cash flow for 2024 is reported at 11.48 billion yuan, maintaining a positive cash flow for 25 consecutive quarters [8]. Future Outlook - The profit forecast for 2025-2026 has been adjusted to 9.2 billion yuan and 10.5 billion yuan respectively, reflecting the challenges in the operator business and the ongoing transition towards AI [9].

Investment Rating - The report maintains a "Recommended" rating for the company, indicating an expected stock price increase of over 15% relative to the benchmark index within the next 12 months [6][12]. Core Views - The company's revenue for 2024 was 121.30 billion yuan, a decrease of 2.38% year-on-year, with a net profit attributable to shareholders of 8.43 billion yuan, down 9.66% year-on-year. The operating cash flow also saw a significant decline of 34.05% [1][2]. - The operator network business faced challenges, but the company is seeing growth in its computing power and terminal segments, which are expected to enhance operational resilience [4][5]. Summary by Sections Overall Performance - The company reported a total revenue of 121.30 billion yuan in 2024, with a decline in operator network revenue by 15.02% to 70.33 billion yuan, while enterprise and consumer segments showed growth [2][3]. - The enterprise business revenue increased by 36.68% to 18.57 billion yuan, although the gross margin decreased by 19.58 percentage points [2]. - Consumer business revenue grew by 16.12% to 32.41 billion yuan, with a slight increase in gross margin [2]. Computing Power - The company accelerated its penetration into major industry clients, with a doubling of revenue from internet giants and large banks, contributing to nearly 60% growth in domestic enterprise revenue [3]. - The company is involved in building distributed high-performance computing resource pools and has developed proprietary chips to support various computing acceleration hardware [3]. Terminals - The company has expanded its AI terminal offerings, with mobile phone revenue increasing by over 40% [4]. - Home broadband terminal shipments exceeded 100 million units, maintaining the top global market share for four consecutive years [4]. Financial Forecast - The company forecasts net profits of 8.74 billion yuan in 2025, 9.31 billion yuan in 2026, and 10.15 billion yuan in 2027, with corresponding PE ratios of 21, 20, and 18 [5][9].