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ZTE dials up to give a higher 9-month profit
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ZTE Corp. posted a net profit of 32 percent growth year-on-year in the first nine months, slightly better than expectations, thanks to income contributions from overseas and handsets, the biggest domestic-listed telecom equipment maker said yesterday.

The Shenzhen-listed ZTE shares, however, dropped 10 percent daily cap yesterday. The price was only a quarter of ZTE's peak price this year because of investor concerns of a slowdown in the economy and recent government telecom policies.

Analysts, however, said ZTE's share is undervalued and it will keep a high growth rate in the fourth quarter and next year with profit engines like mobile phones and the domestic 3G orders.

In the three quarters, ZTE's net profit was 973 million yuan (US$143 million), a 32.19-percent growth on a year ago, higher than the 30-percent growth rate which is the industry expectation.

At the same period, ZTE's revenue was 30.33 billion yuan, a year-on-year increase of 29.34 percent.

"ZTE has established diversified income channels and it has the ability to hedge against risk and keep high growth development," Fang Lu, the Shenyin Wanguo Securities Research's analyst, said in a note.

ZTE's revenue from mobile phone businesses, whose clients include Vodafone and China Mobile, increased 26.06 percent annually in the period. Meanwhile, ZTE's overseas revenue contributed more than 60 percent of its total income.

ZTE's gross margin was 34 percent by the end of September, higher than overseas rivals like Nortel and Alcatel-Lucent, which will help the company stay competitive in the coming 3G era in China, analysts said.

ZTE's shares lost 10 percent in Shenzhen to close at 16.65 yuan yesterday.

(Shanghai Daily October 28, 2008)

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