UBS has released a research report stating that China Mobile Ltd (00941) third-quarter results reflect operating pressure that goes beyond the impact of value-added tax. The bank has lowered its net profit forecasts for 2026 to 2028 by 2% to 5%, assuming slower growth in traditional telecommunications service revenue, and has rolled forward its DCF valuation by three months, thereby cutting its price target by 2% to HK$93. It expects dividends to remain stable and maintains a "Buy" rating.
China Mobile Ltd (00941) reported its third-quarter results for this year, with service revenue of RMB 205 billion, down 5.1% year-on-year; EBITDA fell 7% year-on-year to RMB 73.9 billion; net profit was RMB 27.3 billion, with the year-on-year decline widening to 12.4%. Service revenue, EBITDA and net profit were 1% to 5% below market expectations.
The bank noted that service revenue fell 4.8% and 5.1% year-on-year in the second and third quarters respectively, a larger decline than the 1.5% to 2% impact from value-added tax estimated by the bank, indicating that operating pressure exceeds the VAT impact, as the traditional telecom market struggles to grow while new AI-driven businesses still need time to scale up.
Third-quarter operating cash flow was RMB 70.4 billion, down 8.8% year-on-year, broadly in line with EBITDA. Operating expenses excluding depreciation and amortization fell 1.8% year-on-year, driven by a 7.7% year-on-year decline in network operations and support expenses, as the company continues to optimize its telecom network, which also dragged down China Tower revenue growth. Depreciation and amortization were broadly flat year-on-year.
The company's outlook remains unchanged. Management guided at the interim results that revenue growth (excluding the VAT impact) would be stable and healthy, with coordinated profit growth.
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