Nomura: Maintains "neutral" rating on ZTE Corporation (00763) and raises target price to HK$28.

Nomura released a research report stating that it maintains a "neutral" rating on ZTE Corporation (00763) with a target price raised from HKD 21 to HKD 28. The bank introduced revenue and profit growth forecasts for the fiscal year 2027 for ZTE Corporation, which are expected to increase by 8.5% and 7.7% respectively. The bank stated that in the fiscal year 2024, ZTE's revenue and profit decreased by 2.4% and 9.7% respectively, possibly due to the continued weak demand in the industry from China Telecom Corporation. Although growth in the consumer and enterprise segments remains healthy, the gross profit margin of the enterprise segment decreased by 19.6 percentage points to 15.3% year-on-year, mainly due to the accelerated expansion of the server business. Nomura lowered its revenue forecasts for ZTE for fiscal years 2025 to 2026 by 4.6% to 5.2% to reflect lower-than-expected growth in telecom industry demand. The bank also reduced profit forecast for fiscal year 2025 by 3% and raised profit forecast for fiscal year 2026 by 4%, reflecting a lower gross profit margin, but effective control of operating expenses should help the company achieve better earnings per share in fiscal year 2026.