UBS: Raises China Telecom Corporation (00728) target price to HK$7.4, rating "Buy"

UBS released a research report stating that China Telecom Corporation (00728) had a second quarter service revenue of 124.4 billion RMB, an increase of 2.1% compared to the same period last year. Due to effective cost control, the EBITDA profit margin for the quarter increased by 1 percentage point year-on-year. Net profit was 14.2 billion RMB, an increase of 7.1% compared to the same period last year, higher than the bank and market forecasts by 2%, and also higher than China Mobile Limited (00941) and China United Network Communications (00762). The bank assumes improved cost control and raises net profit forecast for China Telecom from 2025 to 2028 by 0% to 2.5%. The target price has been raised from 6.8 HKD to 7.4 HKD, implying a dividend yield of 4.4% in 2026, with a "Buy" rating. The report points out that the most noteworthy aspect of China Telecom's performance is the stable outlook for traditional telecom business. In the first half of the year, mobile ARPU was 46 RMB, despite facing macroeconomic headwinds, it remained largely stable compared to the same period last year. Hybrid broadband ARPU was 48.3 RMB, also stable compared to the same period last year. Management expects traditional telecom revenue to maintain stable growth, with ARPU values staying stable with the support of value-added services and AI upgrades.