We hosted an investor call with ZTE during our Technology Corporate Day. We maintain our positive outlook on the Company. We expect 2022E revenue to grow to RMB130bn, driven by share gain from wireless/optical transmission network market, industrial digitalization trend, etc. Maintain BUY, with unchanged TP of HK$29.65.
　　We maintain our positive outlook for ZTE’s domestic carrier business in　2022. The Company’s wireless market share is expected to reach 35% in 2022 (vs. 31%/33% in 2020/21). The share improvement will offset the total 5G capex decline of 3% this year. Optical transmission network sales will also rise driven by favorable policy and increasing demand for data. ZTE’s share in this market is expected to increase to 30% from currently 24-25%. In addition, as the telcos are increasing investment allocation to industrial digitalization/IDC/cloud resources, cloud-related market opportunities could be the new growth driver for ZTE,i.e., servers, routers, switches. The Company is a leader in the telecom server market, with 20% share in 2021, which is expected to grow to 25% in 2022. The Company is also eyeing on enterprise server market for financials/internet clients.
　　Non-carrier business will maintain double-digit growth in 2022.Consumer business will maintain double-digit growth in 2022. CPE business (60% of consumer segment rev.) experienced fast growth of 80% YoY in 2021, driven by stay-at-home economy, favorable policy and competence landscape change. We expect the growth to be slower as the market share will remain stable this year, but still remain double-digit. Mobile device sales (40% of segment rev.) were at early stage of development but managed to achieve positive growth in 1Q22 despite smartphone market weakness. The outlook for gov/enterprises businesses also remains positive as the industrial digitalization is trending.
　　Maintain BUY with TP unchanged at HK$29.65. Potential risks includ　China-US trade tensions, additional component restriction/technology ban, and 5G deployment delays.