China Mobile: Steady as a 'ballast', the cash cow doesn't 'drop the chain'!

China Mobile (600941.SH/00941.HK) released its Q3 2025 financial report (as of September 2025) after the Hong Kong stock market closed on the evening of October 20, 2025, Beijing time. The key points are as follows:

1. Operating Data: Revenue & Profit remain stable. $CHINA MOBILE(00941.HK) The total revenue for Q3 2025 was RMB 250.9 billion, an increase of 2.5% year-on-year. The company's communication business saw a slight year-on-year increase this quarter, with revenue growth mainly driven by product sales and other businesses. China Mobile's net profit for Q3 2025 was RMB 31.2 billion, up 1.4% year-on-year. The company's selling expenses and depreciation & amortization expenses both declined this quarter, contributing to profit growth;

2. Core Business Progress: Mobile business declined, broadband business grew.

a) Mobile Business: Continued the trend of "volume increase, price reduction." Dolphin Research estimates that China Mobile's mobile revenue this quarter was approximately RMB 136.1 billion, a year-on-year decrease of 2.7%. Although the company's mobile user base grew to 1.009 billion this quarter, an increase of about 4 million quarter-on-quarter, the per-user tariff fell by about 3% this quarter.

In detail, the growth in mobile data usage continued to squeeze mobile call usage. Mobile data usage increased by 8.9% year-on-year this quarter, while call volume continued to decline by 7.9% year-on-year.

b) Broadband Business: Maintained growth. Despite a 2.7% decline in mobile business this quarter, communication business achieved a 0.8% growth, mainly driven by broadband business. The number of broadband users reached 329 million this quarter, an increase of 5.8 million quarter-on-quarter.

3. Capital Expenditure: Further reduction. $China Mobile(600941.SH) Capital expenditure for Q3 2025 was approximately RMB 41.6 billion, a decrease of RMB 1.8 billion year-on-year. Considering the company's annual target, it is expected that capital expenditure for 2025 will be RMB 151.2 billion, suggesting that Q4 capital expenditure will be around RMB 35 billion, further reducing investment intensity.

4. ROE and Dividend Situation: The company's TTM ROE for this quarter was 9.9%, a slight increase of 0.1 percentage points quarter-on-quarter. The company's ROE for the first three quarters showed a significant improvement compared to last year. The company's dividend repurchases for the past two quarters were RMB 49.4 billion and RMB 54.1 billion, respectively, estimating the current dividend payout ratio at about 73%.

The ROE and dividend situation calculations here are based on post-tax cash operating profit, which was approximately RMB 29.7 billion this quarter.

[Post-tax cash operating profit = (Operating profit + Depreciation & Amortization - Capital Expenditure) * (1 - Tax Rate)]

Dolphin Research's Overall View: Stable performance, focus on increased dividend payout ratio

China Mobile's performance this quarter was generally good, with revenue and profit maintaining single-digit growth. The reduction in operating expense ratio offset the impact of declining gross margins, ultimately driving profit growth.

Communication business is the company's most important business (accounting for nearly 90%), with the company's mobile user base increasing by about 4 million quarter-on-quarter this quarter. As a leading domestic operator, China Mobile's user growth further demonstrates its position in the mobile market.

Behind China Mobile's "stable" performance, the market is more focused on the following two aspects:

a) Capital Expenditure Situation: The company's capital expenditure this quarter was RMB 41.6 billion, a decrease of RMB 1.8 billion year-on-year. Considering the company's annual capital expenditure of RMB 151.2 billion, Q4 capital expenditure is expected to be around RMB 35 billion.

With the end of the high investment period for 5G, China Mobile's capital expenditure has significantly declined. As capital expenditure gradually decreases while depreciation and amortization remain high, the company's cash operating profit will be higher than the operating profit reported in the financial statements (post-tax approximately RMB 25.6 billion), indicating that the company is actually more profitable. Dolphin Research estimates the company's post-tax cash operating profit for this quarter to be RMB 29.7 billion, a year-on-year increase of 2%.

b) Dividend Situation: The company's dividend repurchase this quarter was RMB 54.1 billion, close to Dolphin Research's previous expectation (RMB 53.5 billion). Since the company usually distributes dividends in Q2/Q3, the current dividend payout ratio is estimated to remain around 73%.

For this financial report, China Mobile's operational performance remains stable this quarter, with quarterly profits reaching around RMB 30 billion. Capital expenditure and dividend repurchase are the two main focus areas, with the company maintaining a state of reduced investment and high dividends this quarter, which is the current main investment logic.

With the reduction in capital investment, the company is expected to reduce the pressure of depreciation & amortization, further promoting profit release.

Considering the company's current market value (RMB 1.7 trillion), the expected net profit for 2026 corresponds to a PE of about 11 times (assuming revenue growth of 2.5%, gross margin of 58.5%, and tax rate of 22.5%). Referring to the company's historical valuation range, which mostly falls between 7-13 times PE, the current valuation is relatively high, mainly due to the market's increased focus on high dividends.

Overall, China Mobile's performance maintains low single-digit growth, while the valuation is confirmed to reach over 10 times PE. This is mainly because the current investment in China Mobile is not focused on the company's growth potential but rather on its stability and high dividend characteristics.

From the company's total dividend of RMB 103.4 billion, the current static dividend yield is about 6%. For a stable + high dividend target, a 6% yield is still acceptable. However, it should not be overlooked that in the current environment of interest rate cuts, the market may have higher yield requirements, which requires China Mobile to further increase the dividend payout ratio in the future to enhance investor appeal.

For investors, "leading market position + stable performance growth + nearly 6% dividend yield" is the main motivation for holding China Mobile. Compared to the continuously declining bank interest rates, high-dividend companies have gained more market attention, becoming a relatively stable part of asset allocation. For further improvement in the company's stock price and valuation, it still requires accelerated growth in the company's operations or an increase in the dividend payout ratio to drive it.

The following is Dolphin Research's specific analysis of China Mobile's financial report:

1. Revenue Side

China Mobile's total revenue for Q3 2025 was RMB 250.9 billion, an increase of 2.5% year-on-year. In detail, the company's revenue from communication services this quarter was RMB 216.2 billion, a slight increase of 0.8% year-on-year; revenue from product sales and others was RMB 34.7 billion, a year-on-year increase of 14.8%, which was the main driver of the company's growth this quarter.

The company's communication service revenue grew by 0.8% year-on-year this quarter, with personal communication business declining by 2.7% this quarter; while household and enterprise business continued to maintain a growth of about 7.3%.

For the personal communication business, which accounts for more than half of the total revenue, in detail:

1) Mobile Business Customer Base: The company's total user base reached 1.009 billion, an increase of about 4 million quarter-on-quarter, mainly driven by strategies such as "tariff reduction to attract users" and "number portability discounts";

2) Mobile ARPU: The company's monthly per-user tariff this quarter was RMB 48, a year-on-year decrease of 3%. Over the past year, the company's personal monthly average tariff on the mobile side has declined year-on-year for six consecutive quarters, with the company further increasing "number portability" discounts in the third quarter.

2. Gross Margin

China Mobile's gross margin for Q3 2025 was 60.1%, a year-on-year decrease of 1.5 percentage points. Dolphin Research lists "network operation and support costs" and "product sales costs" as operating costs, thereby estimating the company's gross profit and gross margin situation.

Compared to the product sales segment, the company's communication business gross margin is relatively high. Due to the year-on-year growth in product sales-related business this quarter, the proportion of communication business declined, diluting the overall gross margin.

3. Operating Expenses

China Mobile's operating expenses for Q3 2025 were RMB 118.1 billion, a year-on-year increase of 0.5%, remaining stable. Dolphin Research includes "selling expenses," "employee compensation expenses," "depreciation and amortization," and "other operating expenses" in operating expenses;

1) Selling Expenses: This quarter was RMB 12.2 billion, a year-on-year decrease of 4.9%. Compared to the promotional season in the second quarter, the company reduced some consumer spending this quarter;

2) Employee Compensation Expenses: This quarter was RMB 39.8 billion, a year-on-year increase of 2.2%, with growth rate similar to revenue growth;

3) Depreciation and Amortization: This quarter was RMB 46.6 billion, a year-on-year decrease of 2.1%. In China Mobile's operating expenses, employee compensation expenses are relatively rigid. With the end of the 5G investment peak, the company's capital expenditure is gradually decreasing, which is the main reason for the continuous decline in depreciation and amortization amounts since last year.

As capital investment decreases, the company's depreciation & amortization-related expenses will further decline, thereby promoting profit release.

4. Net Profit

China Mobile's net profit for Q3 2025 was RMB 31.2 billion, a year-on-year increase of 1.4%. The reduction in the company's operating expense ratio offset the impact of declining gross margins, ultimately driving profit growth.

Since the company's depreciation and amortization exceed capital expenditure, from a cash flow perspective, the company's post-tax cash operating profit for this quarter was RMB 29.7 billion (excluding non-operating factors), with a year-on-year increase of RMB 5 billion.