China retail sales in March elevate 3.1% YoY

In March, the total retail sales of consumer goods reached 3.9 trillion yuan, a YoY increase of 3.1%, lower than expectations. The retail sales of consumer goods other than motor vehicles reached 3.5 trillion yuan, up 3.9%. In terms of consumption patterns, the spending in catering was 396.4 billion yuan, up 6.9%, while retail goods reached 3.5 trillion yuan, an increase of 2.7% YoY. Among that, Cultural & Office Appliances and Motor Vehicles decreased by 6.6% and 3.7%, respectively. The YoY growth rate of Grain, Oil and Food, and Sports and Amusements Appliances all surpassed 10%. From January to March, the total retail sales of consumer goods were 12 trillion yuan, a YoY increase of 4.7%, while the retail sales of consumer goods other than motor vehicles reached 11 trillion yuan, up 4.7%.

In March, the total value added of industrial enterprises of designated size grew by 4.5% YoY. In terms of sectors, the value added of mining increased by 0.2% YoY, manufacturing went up by 5.1% and the production and supply of electricity, thermal power, gas and water grew by 4.9%. In terms of industries, in March, the value added of 32 of the 41 major industries kept their YoY growth. Chemical raw materials and chemical products manufacturing, non-ferrous metal smelting and rolling processing industry, automobile manufacturing, computer, communications and other electronic equipment manufacturing were the main drivers, up 9.1%, 11.2%, 9.4% and 10.6% YoY respectively. In terms of Hong Kong stocks, the Hang Seng Index has stabilized at 16,000 points this week, but it is still lacking upward momentum in the near future and is expected to fluctuate between 15,700-16,700 points.

In terms of industry, investors can pay attention to defensive counters such as telecom stocks, which have steady business, pay generous dividends and benefit from supportive policies.

China Mobile (941.HK) achieved remarkable performance in 2023, with robust growth in both revenue and profit. Operating revenue amounted to RMB1.0 trillion, up by 7.7% YoY. Revenue from telecommunications services reached RMB863.5 billion, up by 6.3% YoY, of which digital transformation revenue stood at RMB253.8 billion, up by 22.2% YoY, contributing 29.4% of telecommunications services revenue, showing a strong momentum. Net profit came in at RMB131.8 billion, up by 5.0% YoY.

Total number of mobile customers amounted to 991 million, of which, number of 5G package customers was 795 million. Mobile ARPU reached RMB49.3. Total number of wireline broadband customers reached 298 million, of which, number of household broadband customers was 264 million. Household customer blended ARPU reached RMB43.1. A final dividend of HK$2.40 per share was declared, together with the interim dividend, total annual dividend amounted to HK$4.83 per share, a YoY increase of 9.5%. The annual payout ratio in FY23 was 71% with the yield of 7%. It is recommended to buy at HK$67.00, target at HK$78.00, and stop loss at HK$64.00.

China Telecom (728.HK)’s operating revenues amounted to RMB513.6 billion, representing an increase of 6.7% YoY. EBITDA stood at RMB136.8 billion, up 5.0% YoY. Net profit reached RMB30.4 billion, up 10.3% YoY. In 2023, revenues from the fundamental businesses grew steadily with continuous enhancement in subscriber scale and value. Mobile communications service revenues came in at RMB195.7 billion, representing an increase of 2.4% YoY. Of which, revenue from mobile value-added and applications was up 12.4% YoY to RMB25.8 billion.

Wireline and Smart Family service revenues increased by 3.8% YoY to RMB123.1 billion. Of which, revenue from the Smart Family business amounted to RMB19.0 billion, an YoY increase of 12.8%. Industrial Digitalization business maintained rapid growth, with its revenue reaching RMB138.9 billion, an YoY increase of 17.9%. Revenue from China Telecom Cloud reached RMB97.2 billion, representing an increase of 67.9% YoY. A final dividend of RMB 0.09 per share was declared. Together with the interim dividend, the full-year dividend stood at RMB 0.2332 per share, a YoY increase of 19.0%. The annual dividend payout rate exceeds 70%, and the dividend yield reached 7%. It is recommended to buy at HK$4.40, target at HK$5.00, and stop loss at HK$4.15.