News Alert: Expect 3Q21 earnings to increase by 78%-125% y-o-y

  • ZTE expect 3Q21 earnings to increase by 78%-125% y-o-y to Rmb1.5bn–Rmb1.9bn, according to its preliminary results
  • 3Q21 preliminary earnings is above market expectations of Rmb1.5bn and 9M21 preliminary earnings accounted for 78%-84% of market’s full year estimation
  • Expect positive share price reaction

What’s New

– ZTE (763 HK/000063 CH) announced its preliminary results for 3Q21, according to HKEx announcement on 14 Oct 2021. 

– The company expected 3Q21 earnings to increase by 78%-116% to Rmb1.5bn-Rmb1.9bn and 9M21 earnings to increase by 106%-121% y-o-y to Rmb5.6bn–Rmb6bn.

– The strong performance of 9M21 was attributable to a y-o-y growth of operating revenue, continuous recovery in gross margin and a pre-tax profit of c.Rmb0.8bn for 90% share transfer of its subsidiary Caltta Technologies.

Our View:

– Expect positive share price movement as the 3Q21 preliminary earnings is higher than market consensus of Rmb1.5bn.

– 9M21 earnings accounted for 78%-84% of market’s full year forecast of c.Rmb7.2bn. This will potentially trigger full-year earnings upward revision by the market.

– We currently rate BUY on the counter; TP of HK$36.9(H)/Rmb55.4(A).