BOC International has released a research report maintaining a "Buy" rating on China Communications Services (00552), with the target price adjusted to HK$4.55, based on a forecast price-to-earnings ratio of 7.5 times for the fiscal year 2027.

The report notes that the dividend payout ratio has been raised from 40% in fiscal 2022 to 43% in fiscal 2025, with management targeting no less than 46% by fiscal 2028, further enhancing shareholder return appeal.

In the first half of this year, China Communications Services reported a net profit decline of 7.5% year-on-year to RMB 1.97 billion, while revenue fell 3.2% year-on-year to RMB 74.48 billion, both below the bank's forecasts and market consensus expectations.

During the period, domestic customer-focused revenue dropped 9.1% due to slowed investment and project delivery, with declines in both Telecommunications Infrastructure Services and Application, Content, and Other Services segments, though Business Process Outsourcing services showed resilience and provided some buffer.

AI-related revenue surged 62% year-on-year to RMB 7.42 billion, accounting for 10% of total revenue, primarily driven by a 63% year-on-year increase in AIDC revenue, as the company offers full-stack services encompassing design, construction, and operation maintenance for intelligent computing centers.

Gross margin declined 0.3 percentage points to 10.0%, while savings in SG&A expenses supported a 1.2% increase in operating profit.