BOCI Securities: Lowered China Communications Services target price to HKD 4.57, optimistic about AI computing infrastructure demand

BOC International published a research report stating that, considering a slowdown in telecommunications investment over the next two to three years, it lowered its profit forecasts for China Communications Services (00552) for this year and next by 8.1% and 11.8%, respectively. The target price was cut from HK$5.15 to HK$4.57, implying a 2026 forecast P/E of 7.5x. It reiterated a “Buy” rating, maintained a positive outlook on the company’s mid-term growth, and expects strong demand for AI computing infrastructure.

In the second half of 2025, China Communications Services’ revenue fell 3.2% year over year, but net profit remained stable at RMB 1.48 billion (unless otherwise stated), which was below the firm’s and the market’s expectations. The main reason was a 4.1% year-over-year decline in revenue from domestic telecom operators compared with last year. During the period, domestic non-telecom revenue increased 5.5% year over year. Non-telecom infrastructure service business accounted for more than half of total revenue, making the revenue mix more diversified and resilient. As of the end of the second half of last year, the company’s free cash flow reached RMB 8.42 billion, up 14.1% year over year and improved versus the first half, mainly due to better management of accounts receivable.

(Editor: Wang Zhiqiang HF013)

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