The Zhitong Finance App learned that UBS released a research report saying that China Mobile (00941)'s second-quarter service revenue fell 4.8% year on year to 233 billion yuan, EBITDA fell 7.9% year on year to 97 billion yuan, and net profit fell 7.5% year on year to 50 billion yuan, 1% to 9% lower than UBS and market expectations. The target price was raised from HK$81 to HK$83, maintaining a “neutral” rating. It is believed that the current price corresponds to the predicted dividend rate of around 6% to 7% in 2026, which can support the stock price.
However, cloud and AI-related businesses performed well. Data center revenue increased 13.2% year over year, and cloud computing service revenue increased 18% year over year. The cumulative AIDC contract capacity reached 7GW, of which 5GW was added in the first half of the year. Management pointed out that traditional data center services have low profit margins, so they are expanding to high-value products such as DCI connectivity, computing services, and advanced operation and maintenance to expand the market and enhance profitability. AI-related projects must meet internal rate of return (IRR) requirements, and can simultaneously support revenue and profit growth as demand grows.
In terms of capital expenditure, there was a 4.5% year-on-year increase in the first half of the year, mainly driven by investment in AI networks. However, management emphasized that capital expenditure for the whole year was still under control, and capital expenditure for traditional telecommunications is expected to drop 20% for the whole year (down only 9.8% in the first half of the year). Operating cash flow increased 37% year over year to 144.9 billion yuan in the first half of the year, and cash recovery was strong. The interim dividend was RMB 2.51 per share, the same as the previous year. UBS believes this indicates a stable dividend for the whole year.