How the China Telecom Share Price Rally Stacks Up After New AI and Cloud Expansion Plans

If you are on the fence about what to do with China Telecom stock right now, you are not alone. Plenty of investors are watching this company closely after a run that has seen the share price deliver a stellar 229.7% gain over the past five years. Even after a flat week and a modest pullback of 9.3% over the past month, the long-term trend is very much intact, with 143.0% returns in three years and an eye-catching 39.6% gain in just the last year. Year-to-date, shares are up 21.9%, easily outpacing many market benchmarks.

So, what is driving these moves? Much of the performance has been tied to shifting investor perceptions about the company’s growth prospects and stability in a rapidly evolving Chinese tech landscape. Broader market sentiment around state-owned telecom giants has also had an impact. News of ongoing investments in next-generation networks and digital infrastructure initiatives, plus a period of relative calm in regulatory policy, have kept risk perceptions in check and allowed fundamentals to shine through.

But price alone does not tell the full story. With a value score of 6, meaning China Telecom is currently undervalued in all six valuation checks we use, it is no wonder some investors are looking for an entry point. In the next sections, we will dig deeper into exactly how China Telecom scores so well across various valuation methods, and why these tools are useful starting points for deciding if the stock is truly underpriced. Stay tuned because we will also cover an even more insightful way to gauge value before you make your final decision.

Why China Telecom is lagging behind its peers

Approach 1: China Telecom Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's value. This provides an intrinsic worth based on fundamentals rather than market sentiment. For China Telecom, this involves assessing how much actual cash the business generates and how that number can reliably grow over time.

China Telecom's latest twelve months Free Cash Flow stands at approximately CN¥41.16 billion. Analyst estimates suggest that by 2029, Free Cash Flow could reach as high as CN¥74.53 billion. Analysts offer direct forecasts for five years, and projections beyond this period are extrapolated to reflect expected business growth in a maturing telecom sector.

Using these figures in a 2 Stage Free Cash Flow to Equity DCF model, the intrinsic value per share is calculated at HK$23.03. This represents a value 75.1% above the current market price, indicating that the stock appears undervalued by a significant margin according to this cash flow-based approach.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for China Telecom.

Our Discounted Cash Flow (DCF) analysis suggests China Telecom is undervalued by 75.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: China Telecom Price vs Earnings

For established and profitable companies like China Telecom, the Price-to-Earnings (PE) ratio is a widely used valuation metric. It tells investors how much they are paying for each unit of earnings, making it especially relevant when current profits are robust and stable. Generally, higher growth expectations or lower risk mean investors are willing to accept a higher “normal” PE ratio. In contrast, slower growth or greater risk would justify a lower number.

China Telecom’s current PE ratio stands at 14.1x, noticeably lower than the industry average of 16.7x and well below the average of its closest peers at 27.7x. This suggests that, on the surface, the stock is trading at a discount compared to both its sector and direct competitors.

However, instead of comparing to broad benchmarks alone, Simply Wall St’s Fair Ratio provides a tailored yardstick. This proprietary metric weighs up China Telecom’s unique characteristics, including its earnings growth outlook, profit margins, industry factors, market cap, and risk profile. Because it reflects both company-specific fundamentals and sector context, the Fair Ratio gives a much more reliable sense of whether the stock is priced attractively or not.

In this case, China Telecom’s Fair PE Ratio is 14.6x, almost exactly matching the current market PE ratio. Given this narrow gap, the stock appears fairly valued based on its underlying profitability and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your China Telecom Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story about a company that connects everything you believe about its future, including growth drivers, risks, and potential, with the financial numbers. This immediately shows you what the stock should be worth and why.

Unlike static metrics, Narratives let you tie together your assumptions about where China Telecom is heading with a custom forecast model and see an instant fair value. This makes the whole process interactive and more reflective of your perspective. Narratives are featured within Simply Wall St’s Community page, where millions of investors use this simple tool to share, compare, and refine their views in real time.

Narratives help you decide when to buy or sell by transparently comparing your fair value to the current price, and they automatically update with the latest news or earnings so your view always keeps up with reality.

For example, some investors expect strong AI and cloud growth to push earnings and fair value as high as HK$9.02. Others, more cautious about costs and geopolitical risk, think the fair value is closer to HK$6.21. Your Narrative will show you where you stand, all in one place.

Do you think there's more to the story for China Telecom? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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