UBS has released a research note following China Telecom's (00728) half-year results announcement after the market close yesterday. The company's smart business revenue grew 7.1% year-on-year in the first half, accounting for 12.8% of total revenue—a rise of 1.1 percentage points—largely driven by growth in AI cloud and AIDC operations, with management anticipating further acceleration in the second half.

Core business revenue declined 2.1% year-on-year in the first half, but remained stable after adjusting for value-added tax effects. UBS has set a target price of HK$5.1 for China Telecom, maintaining a "Neutral" investment rating.

During the period, the company's capital expenditure decreased 5% to RMB 32.4 billion, with computing network capex doubling to RMB 15.4 billion, representing 48% of total capital expenditure. Total AIDC installed capacity has reached 8GW.

UBS noted that China Telecom projects steady growth in core business revenue between 2026 and 2030, with smart business revenue expected to account for over 20% of the total. Meanwhile, the group anticipates net profit growth will outpace revenue growth, and the capital expenditure-to-revenue ratio will continue to decline, indicating that smart business is set to deliver higher profit margins and stronger investment returns.