According to recent reports, China International Capital Corp has reiterated its earnings forecasts for CHINA TOWER (00788) for 2025 and 2026. The current share price corresponds to EV/EBITDA multiples of 3.7 and 3.5 for 2025 and 2026, respectively. The firm maintains an outperform rating and a target price of HKD 14.00, reflecting EV/EBITDA multiples of 4.2 and 4.1 for 2025 and 2026, indicating a potential upside of 20.1% from the current share price.
Key insights from the report include: The revenue and net profit for the first three quarters of 2025 align closely with expectations, with the company reporting revenue of RMB 74.32 billion, up 2.6% year-over-year, and a net profit attributable to shareholders of RMB 8.71 billion, up 6.8%, which meets the projections. In the third quarter of 2025, revenue increased by 2.1% year-over-year to RMB 24.72 billion, while net profit attributable to shareholders rose by 4.5% to RMB 2.95 billion.
Development trends indicate that while the revenue from the two wings of the business continues to grow rapidly, revenue from tower services is slowing down. For the first three quarters of 2025, revenue from the company's tower, indoor distribution, smart connectivity, and energy sectors witnessed year-over-year changes of -0.7%, +11.3%, +16.8%, and +11.5% respectively. In the third quarter of 2025, the quarter-on-quarter revenue growth rates for these segments were -1.2%, +9.8%, +13.2%, and +15.9%. Revenue from operator services fell by 0.2% year-over-year, which may be attributed to cost control measures implemented by operators that have reduced income from non-rental tower services.
As of the end of the third quarter, the number of tower sites was 2.137 million, a 2.1% increase since the beginning of the year, with an average of 1.81 tenants per site, unchanged since the start of the year. Revenue from the two wings of the business grew by 14% year-over-year, maintaining robust growth.
EBITDA growth has slowed down, possibly due to credit impairment impacts, yet net profit has seen solid year-over-year growth. For the first three quarters, EBITDA grew by 2.5% year-over-year, with net profit attributable to shareholders increasing by 6.8%. In the third quarter of 2025, EBITDA reached RMB 16.73 billion, a slight increase of 0.4% year-over-year, while the net profit attributable to shareholders was RMB 2.95 billion, a 4.5% increase year-over-year.
Considering the adjustment of the depreciation period for indoor distribution assets, which is expected to reduce depreciation expenses by approximately RMB 870 million for 2025, this adjustment aligns with ongoing optimization in daily operations and troubleshooting systems. The company cited the extended asset lifespan as a reason for this change, which also takes into account the circumstances of telecommunications operators.
The firm believes that this adjustment in depreciation policy is consistent with asset usage patterns and will enhance the company's 2025 profits and dividend foundations, thereby improving shareholder returns.
Risk factors include the potential for depreciation on existing assets not meeting expectations and operational cash flow falling short of projections.