Lyon: Expects China Telecom Corporation (00728) to continue under pressure this year, lowering target price to 6 Hong Kong dollars.

Lyon released a research report stating that China Telecom Corporation (00728) disappointed in the second half of last year, with service revenue increasing by only 0.2% year-on-year to 236.3 billion yuan (RMB). This was due to the slowing growth in mobile service revenue, which increased by only 0.7% annually, and a 0.5% year-on-year decline in industry digitalization revenue, mainly due to the group's focus on cash return. The group distributed a dividend of 0.272 Hong Kong dollars per share for the year 2025, an increase of 4.7% annually, with a dividend payout ratio of 75% and a dividend yield of 6.1%. The firm lowered China Telecom's adjusted net profit forecast for the next two years by 6% and 9%, reducing the target price from 6.2 Hong Kong dollars to 6 Hong Kong dollars, while maintaining an "outperform" rating. The bank predicts that under macroeconomic pressure, China Telecom's revenue will continue to be under pressure this year. Continued capital expenditure reduction will support profit and dividend distribution, but the growth rate of dividends may slow down. The group expects that net profit growth in 2026 will exceed revenue growth, as depreciation is expected to peak between 2025 and 2026.