[ET Net News Agency, 29 October 2020] UOB Kay Hian lowered its target price for ZTE
Corporation (00763) to HK$25.5 from HK$28.3 and maintained its "buy" rating.
The research house said ZTE's net profit dropped 68% to Rmb855m in 3Q, missing
expectations. The sharp decline was due to a contraction in gross margins and a one-off
Rmb2.6bn disposal gain in 3Q 2019.
UOBKH believes gross margins have troughed in 2020 as it expects new product launches
and scale advantages to boost margins going forward, coupled with the increased
contribution from the higher-margin overseas business.
UOBKH cut its net profit estimates for 2020-22 by 16%, 9%, and 1% to Rmb3,628m,
Rmb5,028m, and Rmb6,225m respectively to factor in lower gross margin and higher operating
expense assumptions. (KL)