[ET Net News Agency, 2 November 2020] Macquarie Research lowered its target price for
ZTE Corporation (00763) to HK$20.52 from HK$25.84 and maintained its "outperform" rating.
The research house said high 5G COGS (cost of goods sold) and probably low bidding
prices a year ago, rising R&D spent, and increasing semi design activity all led to a weak
margins outlook.
Macquarie noted that ZTE's 9-month operating profit only reached 54% of full-year
consensus. Net income was down 68%, reaching 58% of full-year consensus. It slashed its
previously optimistic operating margin expectations for 2021 from 9.6% to 6.3% and for
2022 from 11.3% to 6.5%. At the net income level, Macquarie revised down 2021 by 24% and
2022 by 35%. But it increased its 2020 net income estimate by 17%, given the 3Q beat to
its numbers. (KL)