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<Research>UBS Cuts TPs for CHINA TELECOM/ CHINA UNICOM, Sees Limited Div. Growth Room for Telecoms
Recommend 10 Positive 18 Negative 10 |
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The 4Q25 results of Chinese three major telecoms missed expectations, UBS issued a research report saying. Due to macroeconomic headwinds and ongoing investments in AI, net profit growth was slower than estimations. The 2026 outlook remains challenging as the telecom industry is under significant pressure to meet multiple objectives, including improving the shareholder equity return rate or cash recovery rate assessed by the State-owned Assets Supervision and Administration Commission (SASAC); fulfilling social responsibilities by shortening the accounts payable days to upstream suppliers; dealing with the impact of changes in VAT policies on traditional telecom business revenue and profit, while accelerating the transition to non-traditional telecom businesses; adapting to the dynamically changing competitive landscape amid rapid development of AI technology; and new business plans like satellite and quantum communications. The broker believed that the dividend growth potential for telecoms is limited, and the negative impact of VAT should already be reflected in the share prices, as they have declined by 5-15% YTD. UBS kept ratings at Neutral for the H-shares of CHINA MOBILE (00941.HK), CHINA TELECOM (00728.HK) and CHINA UNICOM (00762.HK), with CHINA MOBILE's H-shares remaining its top pick due to its higher net profit margin compared to peers and less impact from VAT on earnings; abundant cash flow is expected to support a higher dividend yield. The table below lists UBS' latest ratings and target prices for the three major telecoms: Stock│ Rating│ TP CHINA MOBILE (00941.HK)│Neutral│$81 CHINA TELECOM (00728.HK)│Neutral│$5.5 -> $5.1 CHINA UNICOM (00762.HK)│Neutral│$8.1 -> $7.5 AASTOCKS Financial News Website: www.aastocks.com |
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