Jefferies Research believes China Tower (00788) could beat consensus in the next two quarters, driven by 2G re-farming at both China Mobile (00941) and China Unicom (00762), and 5G build.
For 3Q (reporting on 18 October), the research house estimated YoY growth of 7.5% in revenue, 8.8% in EBITDA (pre-IFRS16) and 166% in net profit. Its 2H operating profit forecast is 4% above consensus, but net profit is 29% above, owing to lower-than-consensus capex driving lower interest expense.
Jefferies maintained its "hold" rating on Tencent, with a target price of HK$1.93.
Jefferies believes the network sharing plan between China Unicom and China Telecom (00728) will not affect China Tower's near-term prospects for strong earnings growth. It said the stock may have corrected too much recently.
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