2025-10-30 02:01Summary of ZTE (0763.HK) Conference Call Company Overview - Company: ZTE Corporation (0763.HK) - Industry: Telecommunications and Information Technology Key Financial Highlights - 3Q25 Revenues: Rmb29 billion, up 5% YoY attributed to growth in enterprise, consumer, and overseas telecom businesses [1][2] - Server and Storage Growth: Achieved +250% YoY growth in 9M25, contributing to 25% of total revenues [1] - Gross Margin (GM): Reported at 25.9%, lower than the expected 31.0%, due to a short-term revenue mix shift [1][2] - Net Income: Rmb264 million, significantly lower than consensus estimates [1][2] - Operating Profit: Reported at -Rmb565 million, a decline of 127% compared to expectations [2] - Pre-tax Income: Rmb239 million, down 91% from consensus [2] Earnings Revisions - 2025E EPS Estimates: Revised down by 1% to reflect 3Q25 earnings, with expectations for recovery in 4Q25 [2][3] - Future Revenue Projections: - 2025E Revenue: Rmb147.604 billion - 2026E Revenue: Rmb166.111 billion - 2027E Revenue: Rmb181.482 billion [3] Valuation and Price Targets - Target Price for H-share: HK$43.6, based on a 19.2x 2026E P/E [5][16] - Target Price for A-share: Rmb67.6, based on a 32.4x 2026E P/E [5][16] - Current Price: HK$39.56 for H-share, Rmb49.39 for A-share, indicating potential upside of 10.2% and 36.9% respectively [19] Risks and Considerations - Key Risks: - Demand fluctuations in telecom infrastructure and 5G BTS building in China - Market share gains in China - Margin improvements [17] - Non-operating Gains/Losses: Historical range from a loss of Rmb11 billion to a gain of Rmb1.9 billion, which could impact estimates [17] Industry Dynamics - Revenue Mix: Increasing contribution from non-telecom business segments, indicating diversification [6] Conclusion - Despite short-term challenges reflected in 3Q25 results, ZTE is expected to achieve sustainable growth driven by its second curve business development. The company maintains a neutral rating with a fair valuation outlook [1][5]