ZTE(000063)2025-06-09 01:42Summary of ZTE (0763.HK) Conference Call Company Overview - Company: ZTE Corporation (0763.HK) - Industry: Telecommunications and AI technology Key Financial Projections - 2Q25E Revenues: Expected to grow by 12% YoY and 8% QoQ to Rmb35.6 billion [1] - Gross Margin: Anticipated to improve to 37.8% in 2Q25E from 34.3% in 1Q25 [1] - Net Income: Projected to increase by 12% QoQ to Rmb2.7 billion in 2Q25E [1] - Revenue Contribution from Non-Telecom Business: Non-telecom segments (computing network, automotive electronics, digital power, smart devices) accounted for 35% of total revenues in 1Q25 [1] AI Innovations and Product Offerings - AI Product Range: ZTE is expanding its portfolio with AI servers, storage, software solutions, smartphones, home networks, smart displays, and robots [2] - NebulaCoder-V6 Model: Ranked first in the "Chinese LLM Evaluation May 2025 report" by SuperCLUE, showcasing ZTE's capabilities in scientific reasoning, mathematical reasoning, and code generation [2] - DeepSeek All-in-One Machine: Launched AiCube, compatible with multiple mainstream GPUs, enhancing enterprise clients' AI deployment [2] Earnings Revisions - Net Income Revisions: 2025-27E net income revised down by 4%, 4%, and 2% respectively due to lower gross margins [2] - Revenue Revisions: 2025-27E revenues cut by 1% reflecting a slowing capex cycle in telecom networks [2] - Operating Expense Ratio: Revised down to 29% and 27% for 2026-27E, maintaining 2025E unchanged [2] Valuation and Price Target - Target Price for H-share: Updated to HK$29.3 (previously HK$33.0) based on a target P/E of 12.0x for 2026E [8] - Target Price for A-share: Adjusted to Rmb45.4 (previously Rmb51.1) based on a target P/E of 20.3x for 2026E [8] - Market Capitalization: HK$103.8 billion / $13.2 billion [14] Risks and Considerations - Market Risks: Demand fluctuations in telecom infrastructure and 5G BTS building in China could impact estimates [13] - Non-Operating Gains/Losses: Historical non-operating items have varied significantly, which could lead to upside or downside risks [13] Conclusion - Investment Rating: Maintained Neutral for both ZTE-A and ZTE-H due to the slowing capex cycle in the telecom sector [1][8]