With first quarter earnings results in the books, China Mobile (CHL) is keeping its Buy rating from Zacks senior telecom analyst David Weissman, CFA. We looked into his recent report on the company to see why:
We reiterate our Buy recommendation for China Mobile, the largest global cellular service provider by subscriber count, following their announcement of first quarter earnings results, mostly in-line with our estimates. The total number of subscribers continued to increase sequentially. Given the low level of mobile penetration in China, we believe there still remains significant growth potential.
The company continues to tailor its products and services to suit the needs of different segments of the Chinese market. As a result, average rate per user (ARPU) remains high in spite of the fact that many new customers are mostly from rural areas.
Furthermore, the Chinese market is expected to see the launch of 3G mobile services in the second half of 2007. We believe China Mobile is best positioned to capture the major share of this $10+ billion market opportunity. Once the 3G licenses, and any industry restructuring initiatives, have been announced, the competitive environment is expected to intensify as one or more new entrants are likely to gain access to the massive Chinese wireless market.
"We believe China Mobile is best positioned to capture the lion's share of this market, and we therefore maintain our Buy rating and six-month target price of $50. This is based on a reasonable 22.5x P/E [price-to-earnings] multiple to our fiscal 2007 earnings estimates as growth rates in Asia continue to remain well above the worldwide averages.
Read the analyst report on CHL