CICC has released a research report stating that, considering the decline in operator capital expenditures, it has lowered its forecast for CHINACOMSERVICE's (00552) 2026 operating revenue by 3.7% to 152.2 billion yuan. Due to the company's focus on quality improvement and cost reduction, the 2026 net profit forecast is slightly reduced by 1.5% to 3.705 billion yuan. The report introduces initial forecasts for 2027, projecting operating revenue and net profit of 1.541 trillion yuan and 3.79 billion yuan, respectively. The current share price corresponds to a 2026/2027 price-to-earnings ratio of 6.7x/6.5x. Considering the company's diversified business development and its strategy to capture AI opportunities, the firm maintains an Outperform rating and a target price of HK$5.50. This target implies 2026/2027 P/E ratios of 9.2x/8.8x and suggests a potential upside of 35.8% from the current share price.
The main points from CICC are as follows:
The company's 2025 revenue and profit were largely in line with market expectations. It reported operating revenue of 1.501 trillion yuan, a slight increase of 0.1% year-on-year, and a net profit attributable to shareholders of 3.61 billion yuan, also up 0.1% year-on-year.
The company is actively managing the impact of declining operator capital expenditures through business diversification. In 2025, revenue from the operator market was 802 billion yuan, down 4.1% year-on-year, while newly signed contracts in this segment amounted to 1.095 trillion yuan, a decrease of 2%, primarily due to reduced customer capital spending. Revenue from the enterprise customer market reached 656 billion yuan, increasing 5.5% year-on-year. Newly signed contracts in this segment were 897 billion yuan, down 4% year-on-year; however, new orders for smart city and digital infrastructure projects saw significant growth, rising 18% and 40% year-on-year respectively, driven by demand from AI and data centers. Overseas market revenue was 4.3 billion yuan, up 1.0% year-on-year. CICC believes the company is effectively navigating the operator spending downturn, leading to more diverse and stable revenue streams.
Free cash flow showed marked improvement in the second half of 2025, and the dividend payout ratio exceeded expectations. For full-year 2025, the company's gross profit margin was 11.3%, down 0.4 percentage points year-on-year, mainly due to revenue-side pressures. Net cash flow from operating activities was 938 million yuan, a significant decrease from 6.22 billion yuan in 2024, attributed to accelerated outward payments and an increase in year-end receivables and contract assets. However, the company intensified its collection efforts in the second half of 2025, resulting in a 14.1% year-on-year increase in free cash flow for that period. The full-year dividend per share was 0.2241 yuan, with a dividend payout ratio of 43%, up 1 percentage point year-on-year, surpassing CICC's expectations.
Looking ahead to 2026, the company is positioned to capitalize on strategic AI opportunities. In 2025, the value of contracts related to AI initiatives exceeded 5 billion yuan, accounting for over 25% of the total, with more than 3,700 contracts. The company possesses a comprehensive service capability across the entire lifecycle of AI computing centers, including consulting, construction, green energy-saving upgrades, and intelligent operations and maintenance. It is also strengthening its AI application products in key areas such as urban transportation and smart campuses, actively pursuing opportunities in the artificial intelligence business sector.
Risk提示: Potential slower-than-expected revenue conversion in new strategic areas; risks associated with extended payment collection cycles from downstream customers.