China Mobile Limited Faces Earnings Pressure, but Interim Dividend Remains Stable
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China Mobile Limited Faces Earnings Pressure, but Interim Dividend Remains Stable
Service revenue, EBITDA, and net profit declined year on year, but the company maintained its stable dividend orientation and full-year capital expenditure remains controlled.
- Service revenue declined 4.8% year on year to RMB232.8 billion, while adjusted EBITDA declined 7.9% year on year to RMB97.0 billion.
- Net profit declined 7.5% year on year to RMB49.6 billion; excluding the VAT impact, net profit in 1H26 would have recorded positive growth.
- Capital expenditure in 1H26 increased 4.5% year on year, mainly driven by a 71% year-on-year increase in front-loaded computing power capital expenditure.
- Interim dividend per share increased 0.3% year on year to RMB2.51, or 5.5% year on year to HK$2.9003, with a payout ratio of 69%.
Report interpretation
Overview
Morgan Stanley comments on China Mobile Limited's recent results. The company's revenue and earnings weakened year on year, but its dividend maintained stable growth. Management committed to stable revenue growth on a comparable basis, synergistic profit growth, and a stable-to-higher payout ratio.
Core views
Near-term results are affected by lower service revenue, declining profit, and front-loaded computing power investment. The report considers full-year capital expenditure to remain manageable, while the stable dividend policy supports valuation. However, as the current share price is already slightly above the target price, the Equal-weight rating is maintained.
Analysis framework
The report uses the Morgan Stanley ModelWare forecasting framework and is based on DCF valuation; the A-share target price references the H-share target price and applies an A-H premium.
Methodology notes
Discounted cash flow valuation
The base case uses a DCF model, assuming a WACC of 10.3%, a perpetual growth rate of 2%, and a 50% discount to net cash.
Earnings and financial metrics forecasts
Forecast financial metrics in the report are primarily based on the Morgan Stanley ModelWare framework.
A-share and H-share price mapping
China Mobile's A shares and H shares have the same asset structure; the A-share target price is based on the H-share target price and applies a 30% premium corresponding to the average Hang Seng Stock Connect China AH Premium Index over the past three years.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- China Mobile Limited (0941.HK)Primary covered company
- Strengths
- Stable growth in the interim dividend, with a payout ratio of 69%; full-year capital expenditure is expected to remain controlled.
- Weaknesses
- Service revenue, EBITDA, and net profit declined year on year, while front-loaded computing power investment increases near-term capital expenditure pressure.
- Comparison
- Target price of HK$80.00, approximately 1% below the HK$81.20 closing price on August 13, 2026.
- Risks
- Higher-than-expected 5G capital expenditure, 5G tariff regulation, renewed intensification of competition, and a more conservative dividend policy.
- China Mobile Limited (600941.SS)A-share mapped security of the same company
- Strengths
- Has the same asset structure as the H shares.
- Weaknesses
- Valuation is affected by fluctuations in the A-H premium.
- Comparison
- The A-share target price is derived from the H-share target price and applies a 30% A-H premium.
- Risks
- Narrowing of the A-H premium.
Key data
- Service RevenueRMB232.8 billion, -4.8% year on yearEarnings-period data.
- Adjusted EBITDARMB97.0 billion, -7.9% year on yearEarnings-period data.
- Net ProfitRMB49.6 billion, -7.5% year on yearExcluding the VAT impact, net profit growth in 1H26 would be positive.
- 1H26 Capital Expenditure+4.5% year on yearMainly due to front-loaded computing power capital expenditure, which rose 71% year on year.
- Interim Dividend per ShareRMB2.51; HK$2.9003+0.3% and +5.5% year on year, respectively, with a 69% payout ratio.
- 2026E Dividend Yield7.6%Morgan Stanley ModelWare forecast.
Impact & implications
Investors should balance the defensive dividend characteristics against earnings pressure. Valuation and cash returns may improve if the 5G competitive environment improves and capital expenditure and operating expenditure are below expectations; conversely, increased 5G investment, tariff regulation, or intensified competition would compress return potential.
Risks
- Higher-than-expected 5G capital expenditure.
- Regulatory intervention in 5G tariffs.
- Renewed intensification of industry competition.
- The company adopts a more conservative dividend policy.
- Narrowing of the A-H premium.
What to watch
- Whether service revenue can return to growth.
- Whether profit improvement excluding the VAT impact can be sustained.
- Whether front-loaded computing power capital expenditure is consistent with the full-year capital expenditure control target.
- Whether the full-year payout ratio can remain stable or increase further.
- Changes in the 5G competitive landscape, tariff regulation, and operating costs.