Morgan Stanley raised its target price for ZTE Corporation (00763) to HK$36 from HK$26 and maintained its "overweight" rating.
The research house said ZTE is no exception to the recent supply disruption, with equipment factories largely located around the Shenzhen area and there are some efforts involving potentially switching suppliers (as Wuhan remains a base for major transceiver and optical fiber suppliers).
With 75%+ of revenue from operators and declining exposure to smartphones (~15%), Morgan thinks growth potential lies in 5G wireless (50% of 2019 revenue) thanks to increasing
investment scale and transmission/datacom (10%) thanks to share gains.
Morgan said its checks suggest a delay of the 5G Phase 2 tender to potentially 2Q (original schedule is post-CNY), the research house thinks ZTE is likely to maintain a similar market share as in the 4G era (20-30%), with Huawei gaining share mainly from Nokia.
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