ZTE shares rise after interim earnings forecast

PUBLISHED : Tuesday, 23 July, 2013, 12:07pm
UPDATED : Wednesday, 24 July, 2013, 4:44am

ZTE, the world's fifth-largest telecommunications equipment supplier, saw its shares surge yesterday after the company forecast a net profit for the first half of this year.

Shenzhen-based ZTE's share price rose 19.5 per cent to finish at HK$13.84, its highest close since reaching HK$13.94 on May 13. That was the stock's strongest gain since October 30, 2008, when it ended 26 per cent higher.

It marked a good day for the benchmark Hang Seng Index, which advanced 2.3 per cent on a turnover of HK$66.44 billion.

Ricky Lai, a research analyst at Guotai Junan International, described yesterday's trading of ZTE shares as "a burst of enthusiasm from investors", following the firm's positive guidance on its interim results this year.

Lai did not expect the stock to post further strong gains this week.

In filings made with the Hong Kong and Shenzhen stock exchanges on Monday, ZTE said its preliminary financial data showed a 23.47 per cent rise in net profit for the first half to 302.34 million yuan (HK$382.1 million) from a year earlier.

The company said it improved cost controls and focused on efficiency, which resulted in a big drop in expenses. It also recognised a substantial gain from the disposal of its interests in a subsidiary, surveillance equipment maker Shenzhen ZNV Technology.

But its first-half revenue was forecast to fall 11.6 per cent to 37.7 billion yuan.

Lai said ZTE's financial results "could get better after the mainland issues licences for high-speed 4G mobile networks by the end of this year". That infrastructure roll-out would give a much-needed boost to its network equipment business, he said.