【行业研究报告】中兴通讯-Improved margins in 2023

11Mar2024
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
ZTE(000063CH)
Improvedmarginsin2023
ZTEreleaseditsFY23results.Revenuegrewby1.1%YoYtoRMB124bn,inline
withconsensusand3%higherthanourforecast.Netprofitincreasedby15.4%
YoYtoRMB9.3bn,5%lowerthanconsensusandinlinewithourforecasts.Gross
marginfor2023was41.5%,representinga434bpsincreasefromFY22.NPM
showedasimilartrend,reaching7.5%inFY23from4.2%/5.9%/6.6%inFY20-22.
ZTE’sprofitabilityimprovedsteadilyasaresultofthecompany’scontinuedefforts
inoperationoptimizationandcostreduction(i.e.,self-developedcomponents).
For4Q23,thecompany'srevenuegrewby14.7%YoYand21.5%QoQ,while
itsnetprofitgrewby17.8%YoYandfellby37.3%QoQ,respectively.The
itsnetprofitgrewby17.8%YoYandfellby37.3%QoQ,respectively.The
sequentialdeclinewasmainlydueto1)alowerGPM(36.0%inQ4vs.44.6%
inQ3)onalessfavorablerevenuemix,whichwaspartiallyoffsetbycost
optimizationwithin-housedesignedcomponentsinConsumer/Government
andEnterprisesegments,2)a42.5%increaseinSG&AinQ4onhigher
employeebenefitsandmarketing.
Bysegment,1)revenuefromCarriersegmentincreasedby3.4%YoYon
domesticmarketsharegainsinRANandnon-RANbusinessesandoverseas
progress.2)Consumersegmentsalesdeclinedby1.3%YoYonoverseas
inventorydigestionandintensifiedcompetition,partiallyoffsetbydomestic
growthinfamilynetworkbusiness.3)Enterprise&gov'tsegmentsales
declinedby7.1%YoYin2023duetoaslowdownininvestment.
Lookingaheadto2024,webelieveZTEispoisedtocapitalizeonemerging
trendsinthetelecomindustry,focusingontheevolutiontowards5.5G/6Gand
AIcomputepower.MaintainBUYonZTE(000063CH)withadjustedTPat
RMB34.2,basedon15x2024EP/E,whichisclosetoits3-yearavg.(vs.
previous16.5x,consideringpotentialdownsideriskfromcontinuedindustry
headwindsandslower-than-expecteddevelopmentinAI).Nextcatalystmay
betelecomoperators'capexoutlook.