<div id="readability-page-1"><div>M Stanley published a report upgrading ZTE (00763.HK) +2.040 (+7.567%) Short selling $37.71M; Ratio 3.168% H shares to Overweight from Equalweight, raising the H-share TP to HKD39 from HKD31.5, mainly based on potential positive AI catalysts and an inflection point in earnings growth. The rating on ZTE (000063.SZ) +1.440 (+3.952%) A shares was upgraded to Equalweight from Underweight, with the A-share TP lifted to RMB34.3 from RMB29.44.The report noted that on the edge device front, the companys collaboration with ByteDance around the Doubao AI assistant integrates agent-based, multimodal and system-level AI capabilities into smartphones. Early demand indicators, such as the first batch of products selling out, suggest strong market interest. The broker expects ZTE to deepen this partnership, paving the way for broader commercialization of AI smartphones, which could become an important catalyst for sentiment and valuation.The broker believes ZTEs near-term earnings risks have largely been priced in by the market and expects a return to positive growth in 2H26. Due to pressure on gross margins, rising operating expenses, foreign exchange losses and increased impairment provisions, short-term earnings are expected to remain under pressure after a weak 1Q26, with the impact largely reflected in subdued performance in 2Q26.The broker sees a key inflection point emerging in 2H26, when a low base effect will support a return to positive earnings growth. As investor focus shifts toward the recovery phase, alongside the re-emergence of AI catalysts, a potential re-rating may occur. (ha/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-06-03 16:25.) (A Shares quote is delayed for at least 15 mins.)</div></div>

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M Stanley upgraded ZTE's H-shares to Overweight and A-shares to Equalweight, raising target prices to HKD39 and RMB34.3 respectively. The upgrade cites potential AI catalysts from collaborations like ByteDance's Doubao assistant and an expected earnings inflection point in 2H26. While near-term margins face pressure, the broker anticipates a return to positive growth and potential valuation re-rating as AI commercialization accelerates.

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M Stanley Upgrades ZTE  to Overweight, Raises TP to HKD39; AI Catalyst Expected to Ignite in 2H26