Comment report on the communication industry: China Mobile's substantial repurchase shows business development confidence and continues to pay attention to the deterministic growth opportunities of operators' undervalued value

Key investment points

Event: on January 4, 2022, Hong Kong stock China Mobile announced that at the 2021 annual general meeting, the shareholders authorized the board of directors to repurchase no more than about 2047.5 million Hong Kong shares on the Hong Kong stock exchange, equivalent to no more than 10% of the number of Hong Kong shares issued on the date of the 2021 annual general meeting.

5g penetration rate has increased steadily, and the performance of the three operators has increased steadily: we believe that the marginal improvement of the revenue side and cost side of the current operators has significantly boosted the performance steadily. Firstly, from the perspective of revenue side and traditional business, the pressure of speed-up and fee reduction has decreased. With the improvement of 5g user penetration rate, ARPU value has increased steadily. As of the latest business data in November 2021, China Mobile The number of users of China Telecom Corporation Limited(601728) and China United Network Communications Limited(600050) 5g packages is 374 million, 179 million and 150 million respectively, and the 5g penetration rate is 39.13%, 48.06% and 47.13% respectively. We believe that with the steady improvement of ARPU value, the operating revenue will gradually improve. Secondly, operators continue to increase the revenue of innovative businesses such as cloud computing and IDC. As of the mid-2021 report, the cloud revenue of China Mobile is 9.7 billion yuan, yoy + 118%, Tianyi cloud's revenue is 14 billion yuan, yoy + 109%, and cloud computing revenue has achieved rapid growth. Therefore, with the steady improvement of traditional business and the rapid development of superimposed innovative business, the overall performance of operators will be steadily improved; On the cost side, with the continuous promotion of co construction and sharing by operators and the continuous promotion of digital operation within operators, it is expected to achieve continuous improvement in operating costs and daily marketing expenses; To sum up, with the two-way improvement of revenue side and cost side, the overall performance of operators will be steadily upward.

Undervalued and high dividend yield, it is recommended to continue to pay attention to the investment opportunities of operators: as of the latest closing price on January 4, 2022, the Pb valuations of Hong Kong stocks China Mobile, China Telecom Corporation Limited(601728) and China United Network Communications Limited(600050) are 0.69/0.48/0.3x respectively, all at historical lows, and the current dividend yield is 6.85%, 4.61% and 5.02% respectively; According to the latest dividend policy of China Telecom Corporation Limited(601728) , the annual dividend rate in 2021 shall not be less than 60%. Even assuming that China Telecom Corporation Limited(601728) profit does not increase, the dividend in 2021 will still increase by about 50% compared with 2019. After the listing of China Telecom Corporation Limited(601728) A shares, the dividend rate will gradually increase to 70% within 3 years (to 2023), and the CAGR of dividends paid from 2019 to 2023 is about 15%. Assuming China Telecom Corporation Limited(601728) others remain unchanged (profits and share capital remain unchanged, only considering the change of dividend rate), the dividend rate will be increased to 60% and the dividend rate will be increased to 6.92%. We believe that the operators are currently undervalued, with high dividend yield and stable performance. It is recommended to continue to pay attention to the investment opportunities in the operator sector.

Stocks recommended to be concerned: operators: China Telecom Corporation Limited(601728) (A / h), China Mobile (A / h), China United Network Communications Limited(600050) (A / h);

Risk warning: 5g commercial rhythm is not as expected; The pressure of raising speed and reducing fees has increased; 5g user penetration is lower than expected; The development of innovative businesses such as cloud computing and IDC is less than expected.

 

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