20240311-招银国际-中兴通讯-000063.SZ-Improved_margins_in_2023_6页_958kb

ZTE's FY23 financial results show a revenue increase of 1.1% year-over-year to RMB124bn, slightly above consensus forecasts, and a net profit growth of 15.4% YoY to RMB9.3bn, aligning with projections. The gross margin improved to 41.5%, a 434bps increase from FY22, driven by operational optimizations and cost reductions, including self-developed components.

For Q4 2023, revenue rose 14.7% YoY and 21.5% QoQ, while net profit jumped 17.8% YoY but fell 37.3% QoQ due to factors like a lower gross profit margin (36.0% vs. 44.6% in Q3) from unfavorable revenue mix, partially offset by cost savings in certain segments, and higher SG&A expenses.

Segment-wise performance in FY23: Carrier segment revenue increased 3.4% YoY, fueled by domestic market share gains; Consumer segment declined 1.3% YoY amid overseas inventory digestion and competition, with some domestic growth; Enterprise & gov't segment saw a 7.1% YoY decline due to slower investment.

Looking ahead to 2024, ZTE is positioned to benefit from telecom trends like 5.5G/6G and AI compute power. The company is maintained at BUY with a target price of RMB34.2 (down from previous RMB36.90), based on 15x 2024E P/E, reflecting risks from industry headwinds and AI development delays. Key catalysts include potential telecom operators' capital expenditure plans. Financial metrics show steady profit growth and stable P/E ratios over the forecast period.

The report includes analyst certifications, disclosures, and risk warnings, emphasizing the uncertainty of future performance and the reliance on market factors. Valuation suggests potential upside, but risks are noted in events like slower AI adoption or continued industry challenges.