We maintain China Telecom's (the "Company") TP at HK$5.15 and the investment rating as "Buy". Considering the steady improvement of its earnings and dividends, as well as the revaluation brought about by the rapid development of cloud business, we maintain the TP at HK$5.15 and the investment rating as "Buy". The TP represents 12.7x/ 11.4x/ 10.3x 2023-2025 PER.
　　China Telecom recorded steady earnings growth as well as strong dividend payout growth. The Company recorded service revenue and net profit of RMB236.0 billion (+6.6% yoy) and RMB20.2 billion (+10.2% yoy), in line with market expectations. Due to the steady growth of the main businesses and good control of operating expenses, we believe that the Company's net profit will continue to grow steadily in the coming years. Mid-term payout ratio further increased by 5 ppt yoy, and the whole year dividend payout ratio is expected to exceed 70% in 2023.
　　We expect the Company's cloud business may exceed market expectations. The Company aims to expand its cloud business to reach RMB100 billion in 2023, indicating yoy growth of 73%. Currently, market demand is still strong and the key issue is the Company’s own key core technical capability; the Company is expected to continue to strengthen its capabilities in cloud core technology, and plans to invest RMB19.5 billion in cloud resources in 2023. We expect the Company to invest heavily in research and development of core technologies, combined with strong market demand, huge customer base, advantages of cloud-network integration, advantages in data security, as well as large-scale investments in computing power network; we expect that cloud business may exceed market expectations.
　　Catalysts: Increase in dividend payout and dividend payout ratio; promotion of data factor-related business.
　　Risks: Slower-than-expected growth of industrial digitalization business, mismatch between investments and benefits of industrial digitalization business.