China Mobile Attractively Priced

China Mobile Limited's (CHL - Analyst Report) market valuation has declined in recent months based on what we believe are related to general global equity market weakness and additional levels of risk associated with the announcement of mandated telecom restructuring imposed by China's government.

China Mobile currently commands 69% share of the total Chinese wireless market. Once 3G licenses, and any industry restructuring initiatives, have been announced in China, the competitive environment is expected to intensify as one or more new entrants are likely to gain access to the massive wireless market in this region. However, we believe China Mobile is best positioned to capture the lion's share of this market. We, therefore, maintain our Buy rating.

At 22.6x our estimated 2008 EPADS, China Mobile is trading at a significant premium to both its peer group (other Asian carriers) and S&P 500 averages. With respect to other selected valuation metrics, the stock is also trading at a significant premium to its peer group average. According to our view, this valuation premium is justified given the company's solid growth prospects.

We, however, revise our six-month target price to $85 based on a 28.5x P/E multiple to our fiscal 2008 earnings estimates as growth rates in China continue to remain well above the worldwide averages. Our target price was lowered from $95, taking into consideration the possibility of continued equity market/telecom sector weakness.

Nalak Das contributed to the report.

Read the full analyst report on CHL