Comprehensive Analysis of Key Chinese Telecom Stocks
Comprehensive Analysis of Key Chinese Telecom Stocks
Broker: OCBC Investment Research
Date of Report: 23 December 2024
China Mobile: A Resilient Quality Yield Play
China Mobile Limited (CM), the leading telecommunications provider in Mainland China, remains a top defensive stock pick amidst market uncertainties. The company’s diversified portfolio spans voice, data, broadband, cloud computing, and Internet of Things (IoT) services across the Customer, Home, Business, and New (CHBN) markets. In the face of economic downturns, China Mobile has consistently demonstrated resilience and adaptability, leveraging the growing demand for digital services.
Investment Highlights
- Share Buybacks: China Mobile repurchased 728,000 shares at HKD 68.94-69.82 per share in November 2024, marking its second buyback of the year after resuming this initiative in January 2024. This reflects a strong commitment to enhancing shareholder returns.
- Revenue Growth: Despite a 5% YoY decline in mobile average revenue per user (ARPU) due to price competition and low-end user additions, China Mobile exhibited stable service revenue (+1.0% YoY). The fixed-line business offset mobile ARPU declines, and the company projects stronger revenue growth in the second half of FY24.
- Cloud Business Momentum: Cloud revenue grew 13% YoY in 9M24, showcasing robust demand despite macroeconomic headwinds. China Mobile plans to continue investing in computing centers while reducing CAPEX, particularly in 5G network investments, to focus on high-profitability projects.
Financial Metrics
| Metric |
FY23 |
FY24E |
FY25E |
| Revenue (CNY b) |
1,009 |
1,062 |
1,113 |
| Net Profit (CNY b) |
131.8 |
137.3 |
145.7 |
| Dividend Yield |
6.3% |
6.7% |
7.2% |
Analyst Recommendation
Rating: BUY
Fair Value: HKD 93.10
China Unicom: A Value Play with Consistent Fundamentals
China Unicom Hong Kong Limited continues to exhibit solid fundamentals, providing an attractive valuation for investors. The company focuses on telecommunications services, including mobile and broadband offerings, while leveraging its position in China’s rapidly digitalizing economy.
Valuation Metrics
| Metric |
FY24E |
FY25E |
| Price/Earnings |
9.8 |
9.1 |
| Price/Book |
0.6 |
0.5 |
| Dividend Yield |
6.0% |
6.8% |
Analyst Recommendation
Rating: Not explicitly mentioned but metrics indicate a strong value proposition.
China Telecom: A Defensive Giant with Growth Potential
China Telecom Corporation Limited stands as another defensive pick, boasting a strong dividend yield and diversified business strategy. The company has successfully positioned itself to benefit from increasing cloud and digital service demand across China.
Valuation Metrics
| Metric |
FY24E |
FY25E |
| Price/Earnings |
12.5 |
11.6 |
| Dividend Yield |
5.8% |
6.4% |
| ROE |
7.4% |
7.7% |
Analyst Recommendation
Rating: Not explicitly mentioned but metrics suggest a solid defensive play.
Hutchison Telecom: Limited Data with Modest Metrics
Hutchison Telecommunications Hong Kong Holdings Limited offers modest financial metrics, with limited valuation data provided. Notable among its financials is its relatively low price/book ratio and steady dividend yield, making it an option for income-focused investors.
Valuation Metrics
| Metric |
FY24E |
FY25E |
| Price/Book |
0.5 |
0.5 |
| Dividend Yield |
7.9% |
7.6% |
Analyst Recommendation
Rating: Limited details provided.
SmarTone Telecom: A Stable Mid-Tier Player
SmarTone Telecommunications Holdings Limited is a stable mid-tier player, offering consistent financial metrics. While not as dominant as larger peers, its steady dividend yield and moderate valuation ratios make it a reliable choice for conservative investors.
Valuation Metrics
| Metric |
FY24E |
FY25E |
| Price/Earnings |
10.0 |
9.2 |
| Dividend Yield |
7.8% |
7.8% |
Analyst Recommendation
Rating: Not explicitly stated but metrics suggest a stable, income-focused investment.
Conclusion
The Chinese telecommunications sector remains a stronghold for defensive investments, with China Mobile leading the pack as a quality yield play. Investors seeking stability and income generation may also consider China Telecom and China Unicom for their consistent dividend yields and growth potential. Meanwhile, Hutchison Telecom and SmarTone Telecom present opportunities for steady income-focused strategies. With a focus on digitalization and cloud computing, these companies are well-positioned to weather market volatility and capitalize on long-term growth trends.
