Citigroup: lowers ZTE Corporation (00763) target price to 25.4 Hong Kong dollars, maintains "neutral" rating.

Citi released a research report stating that it has lowered the target price of ZTE Corporation (00763) from 29.2 Hong Kong dollars to 25.4 Hong Kong dollars, maintaining a "neutral" rating. ZTE Corporation announced that its revenue for the 2025 fiscal year and the fourth quarter of last year were 133.9 billion yuan and 33.4 billion yuan respectively, roughly in line with expectations. However, net profit was 5.6 billion yuan and 296 million yuan, falling short of expectations, mainly due to a decrease in gross profit margin by 7.7 percentage points and 1.3 percentage points to 30.3% and 29.4% respectively. Key points include: 1) The decline in operator business exceeded the bank's expectations, with expectations for a continued decline in operator business in 2026, mainly due to a reduction in domestic operator capital expenditures, partially offset by growth in international operator business; 2) The gross margin of the government-enterprise and consumer business improved by quarter in the second half of 2025, and the government-enterprise and consumer business will continue to be supported by the increasing demand for servers from domestic cloud service providers' customers in 2026; 3) The expansion of smartphone overseas sales is the growth driver for the consumer business in 2025, and there may be an improvement in its product portfolio in 2026. The company is expected to hold an earnings brief meeting at the end of March, providing a clearer outlook for 2026.