It’s been a good week for China Mobile Limited (HKG:941) shareholders, because the company has just released its latest annual results, and the shares gained 3.6% to HK$54.80. China Mobile reported in line with analyst predictions, delivering revenues of CN¥746b and statutory earnings per share of CN¥5.18, suggesting the business is executing well and in line with its plan. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China Mobile after the latest results.
Following last week’s earnings report, China Mobile’s 22 analysts are forecasting 2020 revenues to be CN¥756.2b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be CN¥5.25, roughly flat on the last 12 months. Before this earnings report, the analysts had been forecasting revenues of CN¥762.3b and earnings per share (EPS) of CN¥5.27 in 2020. So it’s pretty clear that, although the analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of CN¥66.50, suggesting that the company has met expectations in its recent result. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on China Mobile, with the most bullish analyst valuing it at CN¥82.77 and the most bearish at CN¥46.68 per share. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It’s pretty clear that there is an expectation that China Mobile’s revenue growth will slow down substantially, with revenues next year expected to grow 1.4%, compared to a historical growth rate of 2.7% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.0% next year. Factoring in the forecast slowdown in growth, it seems obvious that China Mobile is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion is that there’s been no major change in the business’ prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that China Mobile’s revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple China Mobile analysts – going out to 2024, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 2 warning signs for China Mobile that you need to be mindful of.
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