CLSA has released a research report revising its net profit forecasts for China Telecom (00728) downward by 20% to 21% for the 2026-28 period. The brokerage has also reduced its H-share target price from HK$6 to HK$5.2, which implies a dividend yield of approximately 5%, while maintaining an "Outperform" rating.

The telecom operator's first-half 2026 results fell short of expectations, with total revenue declining 4% year-on-year to RMB 260.47 billion and net profit dropping 15.8% to RMB 19.4 billion. This underperformance was attributed to a mature mobile and fixed-line market, coupled with the impact of a higher value-added tax rate.

The report highlights that intelligent business segments—including computing power, models, and applications—have emerged as a new growth driver, posting a 7.1% year-on-year increase to RMB 31.1 billion and accounting for 12% of total revenue. However, this segment requires higher capital expenditure to sustain its momentum.

Regarding shareholder returns, the interim dividend per share stood at RMB 0.1606, reflecting an 8.8% year-on-year decrease, even as the payout ratio improved to 75%.