Core Viewpoint - The emergence of DeepSeek has ignited the application of AI large models, intensifying the global AI competition and leading to a surge in computing power demand [1] Group 1: Financial Performance - In 2023, the company reported a total revenue of 121.3 billion yuan, a year-on-year decrease of 2.38%, with revenues from operator networks, government and enterprise, and consumer businesses at 70.33 billion yuan, 18.56 billion yuan, and 32.41 billion yuan respectively, accounting for 58%, 15.3%, and 26.7% of total revenue [1] - The revenue from operator networks decreased by 15.02% year-on-year, primarily due to the overall decline in domestic investment [3] Group 2: Industry Trends and Opportunities - The peak of 5G investment has passed, and operator investments are shifting towards emerging fields such as AI and computing networks, with predictions indicating that the three major operators' AI investments will reach 100 billion yuan over the next three years, while leading Chinese internet companies will invest over 500 billion yuan in AI [5] - The evolution of AI technology and its applications will promote the construction of intelligent computing centers and increase business volume on the consumer side, becoming the main engine driving growth in the ICT industry over the next 3-5 years [5] Group 3: AI and Computing Initiatives - The company has made significant progress in AI and computing, promoting the development of a diverse domestic intelligent computing ecosystem and actively participating in the construction of distributed high-performance domestic computing resource pools [6] - The company has launched the AiCube training and deployment machine, which facilitates faster and more secure deployment of DeepSeek models [6] Group 4: Consumer Market and Product Development - The company is focusing on AI smartphones as a key area for rapid market catch-up, with its Nubia brand entering over 30 countries and developing AI smartphones based on major telecom operators' large models [10] - The consumer business revenue grew by 16.1% year-on-year, with smartphone product revenue increasing by over 40% [11] Group 5: Future Strategy - The company aims to embrace AI and build a new experience centered on multi-terminal intelligent interconnection and ecosystem expansion, leveraging its self-developed chips and comprehensive solutions [12] - The company plans to maintain a growth trajectory in mobile and interconnected products by adhering to differentiated innovation and cost leadership strategies [12] - The company is positioned to reshape the ICT industry landscape with its "connection + computing + terminal" full-stack capability system, aiming to strengthen its resilience and explore new opportunities in the AI wave [13]

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].