We maintain a target price of HK$78.00 and maintain an investment rating of “buy”. We expect earnings per share for the 2024-2026 fiscal year to be RMB 6.912/RMB 7.245/RMB 7.533, respectively. China Mobile (the “Company”) has the two characteristics of high prosperity and high dividends. The market is worried that operators' profit growth in the next few years will be under pressure, which may affect dividends. However, we expect that the boom in the industry will be maintained, while the company's cost control and efficiency improvements will enhance its profitability, so the dividend level is expected to exceed market expectations. We maintain a target price of HK$78.00 and maintain an investment rating of “buy”. The corresponding dividend yield for the 2024-2026 fiscal year is 7.0%/7.5%/8.0%.
Earnings and dividends grew steadily, in line with market expectations. Due to slowing market competition, strong demand for industrial digitalization, reduced depreciation pressure due to slowing investment in traditional businesses, and various cost reduction measures, the company's service revenue and shareholder net profit in 2023 reached RMB 863.5 billion (+6.3% YoY) and RMB 131.8 billion (+5.0% YoY), respectively. At the same time, the company plans to increase the dividend payout rate for the full year of 2023 to 71.5%, and plans to increase the dividend payout rate to more than 75% within three years from 2024. Due to stable ARPU and reduced depreciation pressure, we expect shareholders' net profit to achieve steady year-on-year growth in the next few years, and we also expect the dividend payout ratio to grow steadily every year.
We expect the company's cost reduction and efficiency results to exceed market expectations. We believe that due to the fragmentation of current 5G demand, large-scale applications will still take time, and the company will moderately slow down the pace of 5G base station construction. Furthermore, most 5G base stations are currently in the medium to low frequency range, resulting in relatively low construction costs. As a result, we expect operators' 5G capital spending to trend downward. Furthermore, as more 2G/3G base stations and related equipment are decommissioned to reduce network operation and maintenance costs, combined with the decline in operating costs brought about by AI-related applications, and the decline in marketing expenses due to changes in sales strategies, we expect the pressure on operators' operating expenses to be further reduced.
Catalysts: Increase in dividend payout rates; promotion of business related to data elements.
Risk warning: Cloud and data businesses are progressing slower than expected; investment does not match benefits.