(Yicai Global) March 13 — Shares of ZTE popped after the Chinese telecoms company forecast a nearly 19 percent jump in net profit in 2022 from 2021 while research and development expenses exceeded USD3 billion for the first time.
ZTE’s Shenzhen-listed stock price [SHE: 000063] rose 5.33 percent to close at CNY34.01 (USD4.90) while its Hong Kong-listed shares [HKG: 0763] jumped 6.5 percent to HKD24.50 (USD3.10).
Net profit could reach almost CNY8.1 billion (USD1.2 billion), the Shenzhen-based phonemaker said in its 2022 performance forecast recently. Revenue could climb 7 percent to nearly CNY123 billion (USD17.8 billion) from a year earlier. For the first time, R&D expenditures tallied CNY21.6 billion (USD3.1 billion), equalling nearly 18 percent of revenue.
As domestic and international internet giants build artificial intelligence projects, the demand for equipment to build efficient data centers has grown rapidly. Thus, ZTE is investing more in digital transformation represented by cloud and computing power networks.
All of ZTE’s three core business segments grew last year. Revenue of carrier networks rose by 6 percent, that of government and enterprise business jumped by 12 percent, and that of consumer business moved up by 10 percent. Server and storage revenue tallied nearly CNY10 billion, up almost 80 percent from a year earlier.
ZTE has accelerated iterating its server and storage products internally to meet the growing demand for computing power, it said. Meanwhile, R&D employees account for a bigger share of almost 49 percent of the staff.
The trend is everywhere. Rivals Ericsson and Huawei Technologies have also increased their investments in computing power. Moreover, China’s three major wireless carriers mentioned in their annual work meetings early this year that they will continue promoting the construction of such infrastructure.
In 2022, two mobile network operators, China Telecommunications and China United Network Communications Group, each invested more than CNY10 billion in computing power. China Mobile’s Vice President Li Huidi said that the operator plans to invest about CNY50 billion in computing power per year.
ZTE will continue to follow the trends of digitalization and carbon neutrality while improving operational efficiency and resilience to achieve steady growth, it added.
Editor: Emmi Laine, Xiao Yi
