Goldman Sachs released a report indicating that their view on the three major Chinese telecommunications stocks remains positive for the second half of the year, and they believe that the shares will conform to the dividend discount model as a long-term value evaluation.
According to the Futu Securities app, in their report, Goldman Sachs stated that their view on the second half of the year remains positive for the three major Chinese telecommunications stocks, China Mobile (00941), China Telecom (00728), and China United Network Communications (00762). They believe that these shares conform to the dividend discount model as a long-term value evaluation due to clear dividend rate targets, stable business and profit growth, the ability to exceed the realized dividend target given from free cash flow from 2021 to 2026, and the company's willingness to promote shareholder return and management market cap.
The bank pointed out that the dividend rate of the three major Chinese telecommunications stocks for the next 12 months is 7% to 8%, and after deducting the dividend tax, it is 5% to 6%, which is a premium of 3 to 4 basis points over the yield of Chinese one-year government bonds. They are also one of the 30 stocks with the highest dividends among listed companies in Hong Kong with a market cap of over 100 billion. The valuation of these stocks is also lower than the historical average before the COVID-19 pandemic and since 2008. Goldman Sachs believes that with the strengthening of profit growth and free cash flow prospects, the valuation of these stocks is attractive.
Based on their forecasted enterprise value multiple for 2025 as the target price basis, the bank has raised the target price of the three major Chinese telecommunications stocks by 5% to 13%.