[ET Net News Agency, 20 January 2020] Morgan Stanley lowered its target price for China
Telecom (CT)(00728) to HK$3.8 from HK$4.5 and maintained its "overweight" rating.
The research house said the target price cut reflects a 10-15% decline in earnings in
outer years due to lower mobile market share assumptions.
Morgan lowered CT's revenue by 1.3% and 1.5% in 2020 and 2021, respectively, assuming
a stable mobile market share in the 5G cycle versus previously market share gain. With
costs mostly fixed, net profit was lowered by 9% and 15% in 2020 and 2021, respectively.
Morgan believes CT's current low valuation factors in 5G capex risks ahead, intensified
competition and regulatory risks. On the mobile side, after 800Mhz spectrum refarming in
rural areas in 2H 2016, CT has accelerated mobile market share gains and Morgan expects
the momentum to continue. (KL)