Citibank: ZTE Corporation (00763) first quarter revenue meets expectations but net profit falls short.
Citi expects that the revenue growth of ZTE will be driven by new plans such as AI servers, other computing power-related products, and consumer business, which should offset the weakness in the telecommunications network business.
Citibank released a research report stating that ZTE Corporation's first quarter revenue increased by 6% year-on-year to 35 billion yuan, exceeding market expectations by 3%. However, the gross profit margin decreased by 6 percentage points year-on-year to 28.3%, lower than market expectations by 2.7 percentage points. This decrease was partially offset by a 12% decrease in operating expenses. Operating profit fell by 13% year-on-year to 1.6 billion yuan, lower than market expectations by 22%. The bank maintained a "neutral" rating with a target price of 25.4 Hong Kong dollars. Citibank expects that ZTE's revenue growth will be driven by new plans such as AI servers, other computing power-related products, and consumer business, which should offset the weakness in the telecommunications network business.
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