The capital and operating expenses of telecom operators and non-operator customers are significant and are expected to be relatively stable. 5G will bring huge demand for network construction and maintenance, while the development of “new infrastructure” will drive demand for information services.

China Communications Services (00552 HK) is the largest communications support service group in China. The company's services are relatively comprehensive, and can provide one-stop services and various specialized customized services according to customer requirements. The company has stable relationships with telecom operators, government agencies and corporate customers, and is continuously expanding its customer base.

We forecast that the company's revenue and net shareholder profit will grow at a compound annual growth rate of 7.7% and 4.0%, respectively, between 2021 and 2024. Based on the increase in capital and operating expenses brought about by 5G and other “new infrastructure” for operator and non-operator customers, we forecast that the company's revenue will grow 8.3%/8.0%/6.6% respectively in the 2022-2024 fiscal year. Based on our forecasts for revenue growth, gross profit margin, and operating expenses, we forecast earnings per share from fiscal year 2022 to fiscal year 2024 of RMB 0.467/ RMB 0.491/ RMB 0.513, respectively.

For the first time, we covered telecommunications services in China and gave it a target price of HK$4.05 and a “collected” investment rating. The target price corresponds to 7.0 times, 6.7 times, and 6.4 times the price-earnings ratio for the 2022-2024 fiscal year.