The Zhitong Finance App learned that due to the pressure on China Tower (00788) tower business revenue, the impact of compounded depreciation maturity subsided, and lowered the company's 2026 and 2027 net profit forecast by 5.2% and 2.5% to 13.8 billion yuan and 15 billion yuan to maintain the “outperform the industry” rating and target price of HK$11.0, corresponding to 3.9 times EV/EBITDA in 2026 and 2027. There is 20.5% room for growth compared to the current stock price. The bank pointed out that the company's revenue for the first three quarters of 2026 was in line with expectations, and net profit was slightly lower than expected, mainly due to the fact that the effects of depreciation maturity subsided and expense growth slightly exceeded expectations.
CICC's main views are as follows:
The company's recent situation
China Tower announced results for the first three quarters of 2026, with operating revenue of 71,999 billion yuan, down 3.1% year on year; net profit to mother was 10.817 billion yuan, up 24.2% year on year. In the third quarter, the company achieved operating income of 23.306 billion yuan, a year-on-year decrease of 5.7%; net profit to mother was 3.328 billion yuan, an increase of 12.8% over the previous year. CICC pointed out that revenue for the third quarter was in line with expectations, and net profit was slightly lower than expected, mainly due to the fact that the effects of depreciation maturity subsided and expense growth slightly exceeded expectations.
The decline in revenue from the tower business narrowed month-on-month, and the room division business continued to grow
In the third quarter of 2026, the company's operator business revenue fell 8.0% year on year. Among them, tower business revenue fell 10.3% year on year, and the decline was 1.4 percentage points narrower than in the second quarter; room division business revenue increased 10.4% year on year. By the end of the third quarter, the company had 2.184 million tower sites, up 1.6% from the beginning of the year; the average number of tenants at the station was 1.77, down 0.02 from the beginning of the year.
The bank believes that factors such as optimized operator network deployment and declining demand for computer room support are still putting pressure on tower business revenue.
The share of the two wing businesses in revenue increased, and revenue growth slowed
In the third quarter of 2026, the company's revenue from the smart link business and energy business increased by 7.2% and 5.1%, respectively. In terms of intelligent connectivity business, the company continues to cultivate key industries and actively expand new businesses such as low-altitude economy, edge computing power, and “room division +”. In terms of energy business, the company continues to optimize the layout of power exchange networks and promote the implementation of base station photovoltaics and energy storage businesses. The bank pointed out that although the revenue growth rate of the company's two wings slowed in the third quarter, it still maintained high-quality development.
EBITDA is under pressure, and the decline in depreciation and amortization supports the increase in net profit
In the first three quarters of 2026, the company's EBITDA fell 12.0% year on year to 44.828 billion yuan; in the third quarter, EBITDA fell 12.9% year on year to 14.576 billion yuan, and the EBITDA rate fell 5.1 percentage points year on year to 62.5%. In the same period, the company's net profit to mother increased 24.2% year-on-year to 10.817 billion yuan in the first three quarters, and net profit to mother increased 12.8% year-on-year to 3.328 billion yuan in the third quarter.
The bank believes that the depreciation period of assets related to the tower in 2015 supported the increase in net profit, but since the depreciation period adjustment for real estate assets came into effect in the third quarter of 2025, the third quarter of 2026 will no longer enjoy the year-on-year increase brought about by this adjustment, and the net profit growth rate has slowed down.
Risk Alerts
Revenue growth fell short of expectations due to uncertainty over pricing agreement switching.