Bank of China International: China Communications Services (00552) maintains a “buy” rating with strong AI+ revenue growth

The Zhitong Finance App learned that Bank of China International released a research report stating that it maintained the “buy” rating of China Communications Services (00552) and adjusted the target price to HK$4.55, based on a projected price-earnings ratio of 7.5 times for the 2027 fiscal year. The dividend payout ratio was raised from 40% in FY2022 to 43% in FY2025. Management aims to be no less than 46% in FY2028, further increasing the appeal of shareholder returns.

China Communications Services' net profit for the first half of this year fell 7.5% year on year to 1.97 billion yuan, and revenue fell 3.2% year on year to 74.48 billion yuan, lower than the bank's forecast and the market's consensus forecast. Domestic customer attraction revenue fell 9.1% during the period due to a slowdown in investment and project delivery, telecommunications infrastructure services (TIS) and application, content, and other services (ACO) revenue declined, and business process outsourcing services (BPO) remained resilient and partially buffered.

According to the report, AI+ revenue increased 62% year over year to 7.42 billion yuan, accounting for 10% of overall revenue, mainly driven by AIDC's revenue growth of 63% year over year. The company provides full-stack services covering design, construction, operation and maintenance around the intelligent computing center. Gross margin fell 0.3 percentage points to 10.0%, while SG&A cost savings supported a 1.2% increase in operating profit.