China Tower stock price target lowered to HK$13.15 by Jefferies

Jefferies has maintained a Buy rating on China Tower Corp Ltd. (HK:788), despite a slight price target reduction to HK$13.15, following the company's resilient first half 2025 performance which saw revenue, EBITDA, and net profit grow by 2.8%, 3.6%, and 8.0% respectively, with EBITDA margin increasing to 69%. The firm projects China Tower's 2026 net profit to surge by 72%, driving its yield from 4.4% to 7.7%, aided by an anticipated faster decline in capital expenditure, while the stock trades at an attractive 0.5 times 2025 estimated PEG ratio.

Analysis

Jefferies has reaffirmed its bullish stance on China Tower Corp Ltd. (HK:788) with a maintained 'Buy' rating, despite a marginal price target reduction to HK$13.15. The company demonstrated resilience in its first-half 2025 results, with revenue, EBITDA, and net profit growing by 2.8%, 3.6%, and 8.0% respectively, aligning with analyst expectations. Operational efficiency improved, evidenced by a 0.5 percentage point expansion in the EBITDA margin to 69%. A key positive development is the 10% year-over-year decline in capital expenditure, a trend expected to accelerate and help offset the working capital drag from elevated accounts receivable. The core of the investment thesis lies in the forward-looking projections, with Jefferies forecasting a significant 72% surge in net profit for 2026. This earnings growth is anticipated to drive the dividend yield from 4.4% to 7.7% and highlights the stock's attractive valuation, trading at just 0.5 times its 2025 estimated PEG ratio.

Key Decisions for Investors

• Given the projection for 72% net profit growth in 2026 and a low 0.5x 2025 PEG ratio, investors may find the current valuation an attractive entry point for a growth-oriented position.
• Income-focused investors should note the potential for the dividend yield to almost double to 7.7%, which could make the stock a compelling addition to an income portfolio if profit forecasts are met.
• It is prudent to monitor the company's management of its 'still elevated accounts receivable', as this represents a key risk that could create a drag on working capital and cash flow.