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研究部 (Research Team)
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China Mobile (0941.HK): Strong growth

Tuesday, March 11, 2008

4732

China Mobile(941)

Recommendation on 11 March 2008
Recommendation	Buy
Price on Recommendation Date	$111.100
Suggested purchase price	$108.000
Target Price	$156.800

Weekly Special - 000157.SZ Zoomlion

Monthly net add of users recording new high

In the January 2008, China Mobile (CM) recorded a new high for their monthly net add of users for 7.04 million. Not only had the increment been so significant, but it was outperformed its peers, China Unicom (CU), to a large extent, where CM accounted for approximately 84% of total new users in that month.

And it is expected the dominance of CM will be sustainable at least in the coming several quarters, as the restructuring of the telecom sector will not be completed in a short period even if it will occur in a very short future.

Indeed, in the recent quarter CM has been outperforming CU to an obvious extent on the view of monthly net add of users. Thus, CM has been able to keep enlarging its market share in the past years. And we believe the growth of CM will keep being strong.

3G-business readiness

The establishment of the TD-SCDMA base station in the 10 trial cities had almost all completed, and we think that CM is now in the process of testing for the connectivity and receptiveness of signal between the base stations and the wireless handset, in order to ensure providing such 3G services to customers during the 2008 Beijing Olympics Games. Although we think that the PRC may not grant the 3G license before Olympics Games, we still believe the process of trial for TD-SCDMA will give advantages to CM when in the future 3G licenses will be granted to different operators.

Conclusion

To conclude, we feel encouraging to see that, the monthly net add of users of CM in the past month is faster than expected. And we believe such incident is not rare, but proofing the growth of CM is able to keep being strong, and also keep outperforming its peers. Even if restructuring of the telecom sector will be occurred soon, since it is expected taking several quarters for completing the restructuring, the dominance of CM cannot be changed in the coming quarters. So, we still feel positive to CM and maintain it to be our top pick in the telecom sector. We set our 12-month target PE at 26X, which gives a premium to CU at about 10% due to its strong growth outperforming CU. Therefore, our rating is “Buy” and 12-month target price is $156.80.

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China Mobile (0941.HK): Strong growth

Monthly net add of users recording new high

3G-business readiness

Conclusion

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