China Mobile Earnings: Strong Revenue and Core Earnings Growth Beat Its Peers

China Mobile’s 00941 third-quarter 2023 result was strong with year-on-year services revenue and EBITDA each up 9.6%, and net profit up 3.8%. Although not specifically disclosed, the lower net profit growth was likely driven by lower contribution from China Mobile’s 18% owned Shanghai Pudong Development Bank, or SPDB, which reported first-half net profit down 28% year on year but has yet to report its third-quarter earnings. In terms of underlying growth of the core telecom business, the result was ahead of its peers. China Mobile’s DICT (data, information, and communications technology) revenue increased 30%, compared with China Unicom’s 9% and China Telecom’s 16%. We retain our fair value estimate for China Mobile at HKD 91 per share. Our narrow moat rating based on efficient scale and scale-based cost advantage—which allowed the company to earn return on invested capital, or ROIC, of 20.4% in 2022 compared with China Telecom’s 3.6% and China Unicom’s 3.3% over the same period—also remains unchanged. We continue to see China Mobile as undervalued at these levels, but we prefer China Unicom over China Mobile, and then China Telecom on valuation.

For the third quarter, Chinese telecom industry total services revenue across China Telecom, China Unicom, and China Mobile was up 7.4%, with EBITDA up 6.8% and net profit up 5.0%, all year on year. Excluding our estimate of the impact of the nontelecom SPDB on China Mobile’s profit, we estimate industry net profit would have increased by around 6.5% year on year. Industry internet revenue growth remained strong at 18.6% year on year, while service revenue growth from the traditional telecom services (mobile and fixed line broadband) was 5.1%.