UBS: Downgrades China Mobile Limited (00941) rating to "neutral" with a target price lowered to HK$81. Lack of catalysts.

Credit Suisse released a research report stating that China Mobile Limited (00941) has limited potential for upward price movement, lacking a catalyst for revaluation. The target price has been lowered from HK$100 to HK$81, and the rating has been downgraded from "buy" to "neutral". The report indicates that although China Telecom Corporation has made commitments to dividend payouts and continues to control costs, the company faces pressure from internet giants who lead in AI capabilities and continue to expand their market share in cloud services. Given the macroeconomic environment and the limited space for stock price increase, it is believed that China Mobile Limited may struggle to generate excess returns. With an expected dividend yield of 7-8% and a low single-digit compound annual growth rate in earnings by 2026, the company is expected to have limited potential for outperformance. Credit Suisse forecasts that China Mobile Limited's net profit will grow by 2-3% in 2025-2026, with dividend payout ratios reaching 74.5%/76%, resulting in a mid-single-digit percentage increase in dividends per share per year, corresponding to an expected dividend yield of 7-8% in 2026. The company also predicts a decrease in capital expenditure by 2.3% in 2026, as the focus shifts towards computing equipment such as AI servers, which have a shorter depreciation period compared to traditional telecom equipment. The leading AI language models in China are still in the early stages of development, with enterprise customers exploring AI applications. This suggests that early AI projects may require significant customization and profitability could be uncertain. Credit Suisse notes that China Mobile Limited's expected dividend yield in 2026 is around 7%, higher than the Asia-Pacific industry median of 5%, but the compound annual growth rate in earnings from 2025 to 2028 is only 2%, lower than the 6-7% for industry peers in the Asia-Pacific region. Given the company's explicit dividend guidance, Credit Suisse believes that the stable dividend outlook is already reflected in the current stock price.