20260813-招银国际-中国铁塔-00788.HK-1H26_results_D_A_roll-off_drove_earnings_amid_revenue_decline_Maintain_HOLD_7页_1mb

China Tower (788 HK) Summary

Core Content

China Tower released its 1H26 financial results, indicating a decline in revenue and earnings due to a combination of factors including telcos' network optimization and the impact of depreciation and amortization (D&A) roll-off. Despite the revenue decline, net profit increased by 30.1% YoY to RMB7.5bn, with net margin rising to 15.4%. The company also declared a 1H26 dividend of RMB0.19 per share, a 44.3% increase YoY.

Main Points

• Revenue:

  • 1H26 revenue declined 1.8% YoY to RMB48.7bn.
  • Tower business revenue fell 6.7% YoY to RMB35.3bn, which is 72% of total revenue.
  • DAS business revenue increased 9.2% YoY to RMB5.1bn, and Two Wings business revenue rose 14.2% YoY to RMB16.8bn (16% of total revenue).
  • Tower sites grew 2.5% YoY to 2.17mn, but the average tenancy ratio dropped to 1.78.

• Profitability:

  • Net profit rose 30.1% YoY to RMB7.5bn.
  • Net margin increased by 3.8ppts YoY to 15.4%.
  • EBITDA margin decreased by 6.9ppts YoY to 62.1%, mainly due to increased repairs and maintenance costs and other OpEx.

• D&A and Cash Flow:

  • D&A declined 25.2% YoY to RMB19.1bn.
  • CFO declined 75.1% YoY to RMB7.1bn due to receivables build-up.
  • FCF turned negative at -RMB4.5bn (1H25: +RMB16.3bn).

• Dividend and Valuation:

  • The company declared a 1H26 dividend of RMB0.19 per share, up 44.3% YoY.
  • The target price (TP) was adjusted to HK$11.50, down from HK$12.10.
  • The TP is based on a 3.68x 2027E EV/EBITDA multiple, which is at ~1SD above its 5-year average forward multiple.

• Future Outlook:

  • Management expects Tower revenue to resume growth from 2027E, driven by the 15th Five-Year Plan.
  • The overall revenue is expected to be RMB100bn in 2026E and RMB104bn in 2027E.
  • EBITDA is expected to be RMB60.8bn in 2026E and RMB62.7bn in 2027E.
  • The company is expected to see a slight revision in EBITDA forecasts for 2026E and 2027E due to continued industry headwinds and the lagging legacy business.

Key Information

• Shareholding Structure:

  • Blackrock: 6.1%
  • GIC: 5.0%

• Stock Data:

  • Market Cap: HK$43,467.4m
  • Average 3-month total return: 155.9m
  • 52-week High/Low: HK$12.78 / HK$8.81

• Share Performance:

  • 1-month: +1.6%
  • 3-month: -17.0%
  • 6-month: -14.9%

• 12-month Price Performance:

  • A chart is included (not visible in text format) to illustrate the price movement.

Earnings Summary

Financial Summary

Income Statement

Balance Sheet

Cash Flow

Growth and Profitability

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10% over next 12 months.
• SELL: Stock with potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark over next 12 months.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark over next 12 months.

Analyst Certification

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• Past performance has no indication of future performance.
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