Morgan Stanley: China Telecom Corporation (00728) underperformed expectations in the fourth quarter of last year with a target price of 5.5 Hong Kong dollars.

Morgan Stanley released a research report stating that China Telecom Corporation (00728) had service revenue in the fourth quarter of last year that was flat year-on-year at 119 billion RMB (the same below), which was 0.7% lower than expected. EBITDA fell by 5.3% year-on-year to 28 billion RMB, which was 8.2% lower than expected, mainly due to revenue falling short of expectations. Net profit fell by 35% year-on-year to 2.4 billion RMB, which was 36% lower than expected. The annual dividend per share increased by 4.7% year-on-year to 0.272 HKD, with a payout ratio of around 75%. The rating of "synchronized with the market" for China Telecom is maintained, with a target price of 5.5 HKD. Management indicated that this year, service revenue, EBITDA, and net profit before deducting value-added tax will maintain stable growth. Capex is expected to decrease by 9.2% year-on-year to 73 billion RMB, with capital expenditure on computing power expected to increase. The group sees tokens as the main driver of future growth, benefiting from a strong AIDC infrastructure and computing power. Last year, the platform token consumption reached 1.2 trillion tokens.