The Zhitong Finance App learned that Bank of China International released a research report stating that it will maintain the “buy” rating and target price of HK$6.96 for China Telecom (00728) H shares, and keep the revenue and profit forecast unchanged for the 2026 fiscal year. The bank expects the company's net profit for the third quarter of 2026 to be 6.6 billion yuan, down 13.5% year on year. The fourth quarter benefited from a low base, and net profit increased by 33.3% year on year. The bank expects service revenue trends to be basically consistent with the industry, and VAT pressure will continue.
The bank expects China Telecom's EBITDA profit margin for the third quarter of 2026 to be 28.5%. Depreciation of the new computing power infrastructure reduced the year-on-year decline in depreciation and amortization by 1 percentage point to 0.5% compared to the previous quarter.
Bank of China International expects China Telecom's AIDC revenue to increase 10% year over year to 38 billion yuan in fiscal year 2026, and increase the year-on-year growth rate to 10.8% in the second half of the year. Management maintains the guideline of total capital expenditure of RMB 73 billion for the whole year. As the share of computing power investment reached 48% in the first half of 2026, the bank believes that the share for the whole year is expected to exceed the original target of 35%. The company's intelligent computing scale reached 118.8 EFLOPS, and the utilization rate was 94%, helping to meet the growth in AI demand and support the return on infrastructure capital.
In terms of valuation, the bank's target price is based on the 1.5 times market sales ratio (P/S) of the cloud business and 2.1 times the enterprise value to EBITDA ratio (EV/EBITDA). The latter is 60% off the historical average over the past three years to reflect VAT pressure. The company's mid-2026 dividend payout ratio is 75%.
BOCI maintains the operator's investment preferences as China Telecom, China Mobile (00941), and China Unicom (00762), mainly based on higher profit visibility and shareholder returns.