ZTE(000063)：MIXED 3Q RESULTS

　　ZTE released its 3Q23 results. Quarterly revenue of RMB28.7bn (-12.4% YoY and -9.1% QoQ) was below market expectation, largely due to lower-than- expected telecom revenue. 3Q net profit was RMB2.4bn, with 5.1% YoY and - 16.3% QoQ. GPM was resilient at 44.6% in 3Q23 (vs. 38.1%/42.0% in 3Q22/ 2Q23), showing Company’s competitiveness in the telecom market. We revised down our EPS forecast for 2023-25E by 5%/7%/9%, reflecting a slowdown in growth in 3Q23. Maintain BUY with adjusted TP of RMB36.9.
　　3Q revenue missed market expectations, mainly due to 1) server revenue missed expectations, 2) lower-than-expected telecom sales as a result of delayed 5G tender, 3) ongoing pressure on consumer and enterprise/ government segments under macro headwinds. We think the 5G tender delay was a temporary impact on seasonality. However, we trimmed our revenue forecasts by 9%/13%/14% for 2023, 2024 and 2025, respectively, reflecting greater-than-expected headwinds on non-carrier revenue and slower-than-expected server business ramp-up.
　　Resilient GPM continued to be the spotlight. Despite the decline in revenue, GPM remained at 44.6% for 3Q23. We expect full-year GPM to be 42.8%. Looking forward, considering the Company’s competitiveness in the telecom market, we believe the Company’s margin will remain stable at the current level.
　　Maintain BUY, with revised TP to RMB36.9, based on the 16.5x (3-year avg.) FY24E P/E. We trim our net profit forecasts by 5%/7%/9% for 2023E/24E/25E, due to cautious outlook for global telecom spending and soft consumer/ corporates spending. Potential downside risks include Sino- US trade tensions, additional component restriction/technology ban, and 5G deployment delays.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。