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China Tower (SEHK:788) Stock Looks Cheap as Revenue Questions Persist

Simply Wall St · 1d ago

China Tower stock closed at HK$9.315 after a choppy few months that left the 90 day return down about 17%. The market came into this earnings print with low expectations. The headline is that profits are doing the heavy lifting. Quarterly net income reached about C¥3.5b and trailing earnings per share now sit around C¥0.76, which supports a P/E of 10.5x, well below Asian telecom peers. The immediate price reaction tells only a small part of the story. The bigger question is how long this profit strength can sustain that valuation gap.

Is China Tower trading at a genuine discount, or is the low P/E simply reflecting hidden risks in those 13.4% margins and 19.8% earnings growth figures? Compare the current share price to the underlying cash flow valuation in the valuation analysis for China Tower

Q2 2026 Earnings Summary

  • Revenue, Q2 2026 vs. Q2 2025: C¥23,546.9m vs. C¥24,830.0m (declined about 5.2%)
  • Net Income, Q2 2026 vs. Q2 2025: C¥3,504.4m vs. C¥2,733.0m (up about 28.2%)
  • Basic EPS, Q2 2026 vs. Q2 2025: C¥0.2005 vs. C¥0.1563 (up about 28.3%)
  • Net Profit Margin, Trailing 12 Months vs. Prior Year: 13.4% vs. 11.3% (up around 2.1 percentage points)

Prefer clear visuals over staring at rows of raw figures and earnings tables? See China Tower's profit and margin profile in one clear visual view in the full company report for China Tower.

SEHK:788 Trailing 12-Month Earnings & Revenue History as at Aug 2026
SEHK:788 Trailing 12-Month Earnings & Revenue History as at Aug 2026

China Tower profit story faces a real test

Bulls argue that China Tower can keep growing earnings even if tower revenue is flat, thanks to tighter cost control and the One Core and Two Wings push into higher margin services. The latest half shows that profit engine working. Q2 revenue declined about 5.2% year on year, yet net income rose about 28.2% and basic EPS rose about 28.3%. Trailing net margin moved from 11.3% to 13.4%. That points to real execution on operating discipline and mix, not just top line growth. The 30.1% year on year 1H26 profit rise and an interim dividend fit the story of a more cash generative business. GSMA membership and the nationwide upgrade of sites into edge hubs also match the idea that Two Wings is gaining commercial and technical relevance.

Bear worries on revenue and diversification not resolved

Bears worry that core tower revenue stagnation and uncertain returns from diversification will eventually bite. The 5.2% Q2 revenue decline versus last year is a clear data point for that concern. Profit growth is currently driven by margin improvement and cost control rather than higher sales. That supports the risk that earnings are leaning heavily on efficiency rather than demand. The Two Wings concept is central to the bull story, yet disclosures here still focus on group level margins, not on separate profitability from non telecom customers. That leaves the concern about scale and returns from new businesses largely intact. The 90 day share price return, down about 16.5%, suggests investors remain cautious about these structural questions even after a strong profit print.

After a 90 day share price decline and revenue pressure, efficiency gains may mask deeper issues. Review our risk analysis for China Tower which shows 1 important warning sign

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.