Maintain Buy and TP of HK$63
• China Mobile’s earnings have turned around, driven by ARPU gains and the strong performance of new businesses.
• We expect earnings growth to continue through 2023, supporting a valuation recovery.
ARPU beginning to turn around on 5G subscriber growth
• As of end-September, China Mobile had 330mn 5G subscribers, representing 34.6% of its mobile subscribers (vs. 17.5% at end-2020).
• As more 5G-enabled smartphones become available, the share of pure 5G plans is also increasing.
• The average ARPU from a 5G subscriber is CNY88.9―70% higher than the overall average.
• In 1H21, mobile ARPU rose 3.8% YoY, signaling the start of the company’s first ARPU up-cycle in five years.
New businesses such as cloud, mobile edge computing (MEC), and smart home seeing full-fledged growth
• In 1H21, revenue from the data, information, and communications technology (DICT; cloud, MEC, etc.) and smart home businesses expanded 59.8% and 35.6% YoY, respectively.
• As a result, the revenue mix of new businesses has risen to 35% (vs. 27% in 2019).
• We look for new business growth to accelerate as 5G subscribers and related content increase.
Dividend hike confirms strong financial position, despite capex burden
• The company paid an interim dividend of HK$1.63 (+6.5% YoY) for 2021.
• We forecast overall capex to grow 7% in 2021 and 5% in 2022 due to increased 5G spending.
• We see dividend hikes continuing on the back of strong operating cash flow and abundant cash reserves (2021F dividend yield of 6.8%).
• 1) Sharp increase in 5G capex and operating/marketing costs; 2) government regulations on mobile plans
|FY ( Dec.)||2018||2019||2020||2021F||2022F||2023F|
|OP margin (%)||16.6||15.6||14.7||16.0||17.2||18.4|
|Note: Under GAAP Source: Company data, Mirae Asset Securities Research estimates|
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