Citibank: ZTE Communication's first quarter revenue slightly exceeded expectations, target price of 25.4 Hong Kong dollars.

Citigroup released a research report stating that ZTE's first-quarter revenue increased by 6% year-on-year to 35 billion yuan, exceeding market expectations by 3%. The gross margin fell by 6 percentage points year-on-year to 28.3% due to the impact of product mix, lower than market expectations by 2.7 percentage points, partially offset by a 12% decrease in operating expenses. Operating profit decreased by 13% year-on-year to 1.6 billion yuan, below market expectations by 22%. Citigroup expects that ZTE's revenue growth will be driven by new plans such as AI servers, other computing power-related products, and consumer business, which should offset the weakness in the telecommunications network business; the neutral rating is maintained with a target price of 25.4 Hong Kong dollars.