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Core views:　　On Nov 30, 2022, China Mobile announced that the plan of its parent group China Mobile Communications Group Co., Ltd. (CMCC) to boost holdings in its A-shares will be extended by one year due to objective reasons such as available window periods beyond quiet periods, with the plan remaining unchanged otherwise. The fundamentals of China Mobile have continued to improve. We expect that with the rapid growth of its 5G and gigabit broadband users, the decrease in its capital expenditure, the increase of the dividend payout ratio, and the optimization of cost control, China Mobile’s average revenue per user (ARPU), cash flow and net profit still have vast room for improvement, and its cloud computing business is growing rapidly in the meantime. Based on the improving profitability of the traditional business, the development of innovative businesses such as cloud computing, and the current state of being relatively undervalued, we are optimistic about the stock"s potential rerating. Based on China Mobile’s historical valuation and the valuation of domestic operators, we assign 15x 2022E PE to its A-shares and 1.0x 2022E PB to its H-shares to derive a target price Rmb89 and HK$66, respectively, and reiterate the "BUY" rating on both.　　Abstract:　　CMCC extends its A-share shareholding increase plan by 1 year due to objective reasons, e.g., available window periods beyond quiet periods.　　Back in Jan 2022, China Mobile announced that its parent CMCC planned to increase its holdings in its A-shares during the period from Jan 21 to Dec 31, 2022, with the cumulative amount of additional holdings between Rmb3bn and Rmb5bn. From Jan 21 to Jan 27, 2022, CMCC increased its holdings by about Rmb1.509bn. Due to objective reasons such as available window periods beyond quiet periods around China Mobile’s periodic financial reports, the quiet period for the second issue of options granted, and market closures during holidays, CMCC did not further increase its holdings during the period from Feb to Nov 2022. According to China Mobile’s announcement, CMCC intends to extend the term of this plan to Dec 31, 2023, by 12 months, with the remaining unchanged otherwise. We believe that the decision to extend the shareholding increase plan is mainly affected by objective factors, and it also provides better support for the subsequent performance of China Mobile"s stock price.　　China Mobile fundamentals continue to improve, and we are optimistic about the continued rapid growth of the cloud computing business.　　On Nov 30, China Mobile said in the earnings call that it will push forward the comprehensive and integrated development of its CHBN markets, where CHBN refers to the “Customer” market (C), the “Home” market (H), the “Business” market (B) and the “New” market (N), and strive to build a new information service system of “connectivity + computing force + abilities” based on 5G + the computing force network (CFN) + the smart mid-end platform. Revenue from the data, information and communications technology (DICT) business in 1-3Q22 reached Rmb68.5bn, an increase of 40.0% over the same period last year. In 1H22, the revenue of the mobile cloud business was Rmb23.4bn, up 103.6% YoY, and we expect the annual mobile cloud revenue to exceed Rmb40bn. According to IDC data, China Mobile ranked 6th, one notch higher, by market share in the mobile public cloud (laaS+PaaS) service market in 1H22. According to the official website of the mobile cloud segment, the number of enterprise customers of its mobile cloud segment has exceeded 2mn, and more than 6,000 industrial cloud projects have been implemented. A number of industry cloud benchmarks such as government clouds, education clouds and medical clouds have been successfully built. Among them, there are more than 1,100 cloud projects of central state-owned enterprises (SOEs), such as China Certification & Inspection (Group) and Kweichow Moutai Group. We believe that its mobile cloud market share and competitiveness will continue to improve, fueling the Company’s revenue and earnings growth in the medium and long term.　　With the trend of improvement in fundamentals, we are optimistic about the upward trend of the Company’s valuation.　　1) From the PB perspective, its H-shares have been trading at 0.98x PB in the past five years and 1.35x PB in the past ten years, which compares to only 0.79x PB (LF) at present, so there is considerable room for recovery. 2) From the PE perspective, we estimate that China Mobile will deliver a net profit CAGR of about 10% in 2022-2024, and its A-shares are currently trading at only 11x 2023E PE. China Mobile"s business model has strong sustainability, impressive long-term competitiveness and high profit quality, which should warrant a certain premium from the PE perspective. 3) From the EV/EBITDA perspective, EV/EBITDA is also an important valuation method for operators with high capex and depreciation & amortization, and domestic operators are more comparable to overseas peers under this valuation method. According to our calculation, the current EV/EBITDA multiples of China Mobile"s A-shares and H-shares are 2.9x and 1.3x, respectively, far lower than the 4x-6x range of comparable overseas peers such as AT&T, Verizon and Deutsche Telekom, and there is notable room for further improvement. 4) From the perspective of the separate valuation of the cloud computing business: With the improving competitiveness and scale of China Mobile"s cloud computing business, the cloud business is likely to be valued under the sum-of-the-parts (SOTP) valuation framework, which may also bring good valuation elasticity. In summary, based on the improving profitability of the traditional business, the development of innovative businesses such as cloud computing, and the current state of being relatively undervalued, we are optimistic about the stock"s potential rerating.　　Potential risks:　　Increased competition among operators; the immature 5G business model; 5G-related policy changes; China Mobile’s emerging businesses, such as cloud computing, failing to grow as expected; China Mobile"s ARPU failing to improve as expected; China Mobile"s cost control falling short of expectations; China Mobile"s 5G base station construction not up to expectations; China Mobile"s capex control failing expectations; China Mobile"s free cash flow growth missing expectations.　　Profit forecast, valuation and rating:　　The fundamentals of China Mobile have continued to improve. We expect that with the rapid growth of its 5G and gigabit broadband users, the decrease in its capital expenditure, the increase of the dividend payout ratio, and the optimization of cost control, China Mobile’s ARPU, cash flow and net profit still have vast room for improvement, and its cloud computing business is growing rapidly in the meantime. Based on the improving profitability of the traditional business, the development of innovative businesses such as cloud computing, and the current state of being relatively undervalued, we are optimistic about the stock"s potential rerating. We put our 2022E-2024E net profit forecasts at Rmb126.7bn/138.9bn/153.2bn, respectively. Based on China Mobile"s historical valuation (its H-shares were on average trading at about 11x PE and 0.98x PB in the past five years) and the valuation of domestic operators, with China Telecom (00728.HK)/China Unicom (00762.HK) trading at 9.2x/7.4x 2022E PE based on Wind consensus estimates, respectively, and considering the leading position of China Mobile and its better profitability and larger business scale, we assign 15x 2022E PE to its A-shares and 1.0x 2022E PB to its H-shares to derive a target price Rmb89 and HK$66, respectively, and reiterate the "BUY" rating on both.【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

关键词： shareholding