Guotai Junan issued a report indicating that China Telecom's profit grew steadily in the first quarter and that high-quality development continued to advance. Considering the steady increase in profits and dividends, as well as the opportunities brought by the rapid development of the cloud business, maintaining a target price of HK$5 for H shares is equivalent to predicting a price-earnings ratio of 12.7 times this year, and the rating is “buy.”
According to the report, China Telecom's service revenue and net profit for the first quarter increased by 5% and 7.7%, respectively, year-on-year, in line with market expectations. Due to the steady growth of the main business and good control of operating expenses, the report believes that the company's net profit will continue to grow steadily in the next few years. The company plans to increase the dividend payout ratio to over 75% within three years from 2024. As a result, the report believes dividends will grow steadily over the next few years. Based on the closing price as of April 23, 2024, China Telecom's dividend rates for 2024 to 2026 are expected to be 6.5%, 7.2%, and 8%, respectively.