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Research Report

29/04/2020 16:37

{I-bank focus}JEF revises TPs for telecom service players

[ET Net News Agency, 29 April 2020] Jefferies Research the combination of 2019/1Q 2020
telco results, 2020 capex guidance, and recent 5G tenders have removed excessive market
concerns that 5G capex would skyrocket and telcos continue with aggressive price
competition and/or material 5G handset subsidies.
The research house's below-consensus view on 5G capex and confidence in telcos' pricing/
subsidy discipline is playing out. However, Covid-19 has set back the sector's mobile
revenue growth recovery in 1Q.
More importantly, Jefferies said there is a strong indication that the government is
willing to trade faster achievement of 5G nationwide coverage for lower industry capex and
less competition, by encouraging more network sharing and deployment of lower frequency.
Jefferies sees more downside than upside in longer-term capex. With structurally lower
competitive intensity, the Chinese telcos look seriously undervalued. It revised its
ratings and target prices for the telecom service players as follows:
Name Rating Target Price
China Comm Ser (00552) BUY from HOLD HK$6.72 from HK$5.05
China Mobile (00941) BUY HK$72 from HK$64.88
China Telecom (00728) BUY HK$3.23 from HK$7.65
China Tower (00788) BUY HK$2.12 from HK$1.93
China Unicom (00762) BUY HK$7.44 from HK$23.86
YOFC (06869) HOLD from UNDERPERFORM HK$15.96 from HK$11.1
ZTE Corp (00763) UNDERPERFORM HK$18.39 from HK$16.51


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