Morgan Stanley published a research report. According to data from the Ministry of Industry and Information Technology, it is predicted that the growth rate of service revenue in the mainland telecommunications industry will slow to 4.6% in the fourth quarter of 2023, compared to the 7.4% increase in the third quarter. However, in the context of state-owned enterprise reform, it is expected that improved cash flow will help increase shareholder returns, and reaffirms the “increase” rating on the three major Chinese telecommunications stocks. Damo predicts that in the fourth quarter of 2023, China Mobile, China Telecom and China Unicom service revenue will increase by 4%, 6%, and 3.9% year-on-year, while net profit will increase by 6.1%, 9.2%, and 38.2%, respectively (affected by the low base). Meanwhile, China Tower and China Communications Services are expected to face greater short-term growth pressure.

Based on steady profit growth, declining capital expenditure, increased shareholder returns, and attractive valuation levels, Damo continues to be optimistic about the three major Chinese telecommunications stocks, and maintains a “in sync with the market” ratings for China Tower and China Communications Services. Damo raised China Mobile's target price for H shares from HK$75 to HK$80, China Telecom's target price for H shares from HK$4.5 to HK$5, and China Unicom's target price from HK$6 to HK$6.5. As for China Tower and China Communications Services, the target prices are HK$0.9 and HK$3.5, respectively.