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<Research>BofAS Expects ZTE's Server Biz Growth to Remain Strong, Maintains TP and Buy Rating
Recommend 17 Positive 50 Negative 28 |
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BofA Securities noted that ZTE (00763.HK) saw its net profit slump by 43% YoY to RMB296 million in 4Q25, which was 53% below the broker's expectations, owing to smaller carrier business scale and higher year-end expenses. Quarterly sales were 8% and 22% below the broker's and market's expectations, respectively, up only 7% YoY to RMB33.4 billion. ZTE's government/ enterprise business achieved a YoY revenue growth of 100%, driven primarily by a doubling in the scale of its server expansion. The server business accounted for 20% of 2025's total revenue, a spike from less than 10% in 2024. Growth was expected to remain strong this year, based on an expanded customer base from BIDU-SW (09888.HK) and BABA-W (09988.HK) to potential clients like TENCENT (00700.HK) and ByteDance, reaccelerated demand for general cloud servers, and the ongoing expansion of AI server business, particularly in the AI server domain. The broker trimmed its profit forecasts for ZTE by about 6% for this year and next, reflecting pressure on the telecom operator business. In view of the RMB appreciation factor, the target price for ZTE's H-shares remained unchanged at HKD28, with a Buy rating. AASTOCKS Financial News Website: www.aastocks.com |
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