China Telecom Reports Strong Second Quarter in Line With the Chinese Telecom Sector

In our view, no-moat China Telecom continues to be undervalued after reporting a strong first-half result with 8.8% services revenue growth year on year and 12% underlying net profit growth year on year. Second-quarter services revenue growth of 7.7% implied there was only a very mild slowdown in the second quarter with lockdowns and the economy slowing. In our view, the company is on track to hit its target of double-digit revenue and net profit growth for 2022 as outlined by management at the full-year result in mid-March. First-half revenue growth was driven by industrial digitization up 19% year on year and mobile revenue up 6% year on year. Mobile growth was driven by continued 5G customer growth with 44 million 5G package customers added over the quarter and 5G penetration reaching 60.3% of the total base.