Lyon: Cut China Telecom Corporation (00728) target price to HK$5.2; first half performance disappointing.

Lyon released a research report stating that it has lowered the consensus forecast for China Telecom Corporation (00728) net profit from 2026 to 2028 by 20% to 21%, and reduced the target price for H shares from HKD 6 to HKD 5.2, implying an approximate 5% dividend yield. The rating of "Outperform" is maintained. The telecom's performance in the first half of 2026 was disappointing, with total revenue decreasing by 4% year-on-year to RMB 260.47 billion, and net profit down by 15.8% to RMB 19.4 billion, affected by a sluggish mature mobile and fixed-line market, as well as the increase in the VAT rate. The report noted that the intelligent business (computing power, models, and applications) has become a new growth driver, with a year-on-year increase of 7.1% to RMB 31.1 billion, accounting for 12% of total revenue, but requiring higher capital expenditures. The interim dividend is set at HKD 0.1606 per share, a year-on-year decrease of 8.8%, despite the payout ratio increasing to 75%.