CICC: Maintain CHINA TOWER (00788) Outperform rating with a target price of HK$14.

CICC released a research report stating that it maintains the profit forecast for CHINA TOWER (00788) for 2025 and 2026. The current stock price corresponds to 3.7/3.5 times the 2025/2026 EV/EBITDA. It maintains an outperform industry rating and a target price of HK$14.00, corresponding to 4.2/4.1 times the 2025/2026 EV/EBITDA, with a 20.1% upside potential compared to the current stock price. Key points from CICC: 1-3Q25 revenue and net profit basically meet the bank's expectations The company announced its 1-3Q25 performance: revenue of RMB 74.32 billion, up 2.6% year-on-year; net profit attributable to shareholders of RMB 8.71 billion, up 6.8% year-on-year, in line with the bank's expectations. 3Q25 revenue was up 2.1% year-on-year to RMB 24.72 billion; net profit attributable to shareholders was up 4.5% year-on-year to RMB 2.95 billion. Development trends: Revenue growth for both wings of the business remains high, while tower-related business revenue slows down By segment, in 1-3Q25, the company's tower/indoor distribution/smart connection/energy business revenues were down 0.7%/11.3%/16.8%/11.5% year-on-year respectively; 3Q25 quarterly growth rates for each business were -1.2%/9.8%/13.2%/15.9%. 3Q25 revenue from operator business was down 0.2% year-on-year, which the bank believes may be due to a decrease in non-rental service revenue in the tower business under the backdrop of operator cost control. By the end of 3Q, there were 2.137 million tower sites, up 2.1% from the beginning of the year; the average number of tenants per site was 1.81, flat compared to the beginning of the year. 3Q25 revenue for both wings of the business was up 14% year-on-year, maintaining rapid growth. EBITDA growth slows down, possibly due to credit impairment effects, while net profit grows well year-on-year In the first three quarters, EBITDA grew by 2.5% year-on-year, while net profit attributable to shareholders grew by 6.8% year-on-year. In 3Q25, EBITDA was RMB 16.73 billion, up 0.4% year-on-year; net profit attributable to shareholders was RMB 2.95 billion, up 4.5% year-on-year. Taking into account the contribution of the adjustment in the depreciation period of indoor distribution assets to profit, the internal profit growth in 3Q25 slowed compared to 1H25, with the bank expecting this to be mainly due to an increase in costs such as credit impairment losses. Change in indoor distribution asset depreciation period, expected to reduce indoor distribution asset depreciation by approximately RMB 870 million in 2025 The company announced a change in accounting estimates, effective as of July 1, 2025, where the depreciation period for indoor distribution assets was changed from 7 years to 10 years, expected to reduce indoor distribution asset depreciation by approximately RMB 870 million in 2025. The company disclosed that the reason for the change was the continuous optimization of the daily operation and fault detection system of the indoor distribution system, which extended the asset life, and also referenced the situation of telecommunication operators. The bank believes that this depreciation policy adjustment is in line with the actual usage of fixed assets and will help improve the company's 2025 profit and dividend base, enhancing shareholder returns. Risk warnings: Depreciation of existing assets expires less than expected; operating cash flow is lower than expected.