Citigroup Notes ZTE's Q1 Revenue Meets Expectations, Yet Net Profit Falls Short

Stock News04-27

Citigroup released a research report indicating that ZTE Corporation (00763) reported a 6% year-on-year increase in first-quarter revenue to RMB 35 billion, which was 3% higher than market expectations. However, gross margin was impacted by product mix, falling 6 percentage points year-on-year to 28.3%, which was 2.7 percentage points below market forecasts. This decline was partially offset by a 12% decrease in operating expenses. Operating profit fell 13% year-on-year to RMB 1.6 billion, falling short of market expectations by 22%. The firm maintained a "Neutral" rating with a target price of HK$25.4. Citigroup expects that ZTE's revenue growth will be driven by new initiatives such as AI servers, other computing power-related products, and consumer business, which should help offset the weakness in the telecommunications network business.

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