Goldman Sachs released a research report, rating China Telecom (00728) as "buy", and raised the earnings forecasts for 2024 to 2026 by 1.8%, 2.5%, and 1.3% respectively. The target price was slightly raised from HK$5.3 to HK$5.4.
China Telecom's average monthly per household ARPU and profit margin remained stable in the first half of the year, becoming a highlight of the telecommunications sector performance. The Group's mobile ARPU increased slightly by 0.2% year-on-year, while peers declined by 1 to 3%. The bank believes that the Group's second quarter performance should help alleviate investors' concerns about its slowing revenue and deteriorating profitability.
The report pointed out that the previous guidance from China Telecom's management was that the EBITDA margin would continue to decline, but the rate of decline would slow down in the coming years. However, due to strict expenditure control, the Group's EBITDA margin in the second quarter increased by 0.6 percentage points year-on-year. The bank believes that this should increase investors' confidence in profit growth in the second half of the year, and expects the Group to continue to achieve strong profit growth this year.