Matters:
On November 16, US time, Apple announced the adoption of the RCS messaging standard and stated that the feature will be introduced through a software update later in 2024.
Commentary:
Apple officially supports 5G news, and the ecosystem continues to mature, further opening up market space. Apple has officially made it clear that it will increase support for RCS and provide information services to Apple users along with iMessage. RCS is an integrated communication standard issued by the GSMA, and domestic operators generally regard it as an important part of 5G messaging. Apple clearly supports RCS this time, which will add 250 million domestic iPhone users to the 5G message coverage. Earlier, the Ministry of Industry and Information Technology publicly solicited comments on the “Notice on Strengthening End Network Collaboration to Help Scale Development of 5G Messaging” (draft for comments), China Mobile completed the recruitment of partners with 5G reading terminal analysis capabilities, the domestic 5G messaging product matrix was gradually improved, and the ecosystem continued to mature. As a leading enterprise in the field of 5G messaging, the company supports 800 million terminal coverage and online operations. We judge that at a time when the operator's 5G messaging business is expected to expand next year, Apple's addition to the 5G messaging camp will further increase the reach of the company's 5G messaging business, enhance the marketing effectiveness of 5G messaging, and further promote the acceptance of the 5G messaging business by B-side customers and open up room for growth in the company's new 5G messaging business.
5G news opens a 100 billion market, and the company's performance space is expected to be further opened up. At China Telecom's 2023 Digital Technology Ecology Conference, Xu Gang, the company's president, said that the traditional short space of 40 billion dollars has become 100 billion in the 5G messaging era, while the market for traffic services has a space of 400 billion dollars, and the future formation of a super application ecosystem will have trillion dollars of market space. According to our estimates, assuming that the current revenue volume of the company's SMS business is about 3 billion yuan, or 7.5% of the entire traditional short market of 40 billion dollars, assuming that the company maintains the same market share in the 5G messaging era, the company's 5G messaging business revenue volume will reach 7.5 billion yuan. The company has a first-mover advantage in 5G messaging, and its share is expected to increase further, while 5G messaging, in particular, the platform model of cooperation with operators is settled according to the number of successful service analysis and has higher profitability. Furthermore, based on the 5G messaging ecosystem, the company is expected to enter the broader market of traffic services, and the company's performance space is expected to be further opened up in the 5G messaging era.
5G rich media messaging has achieved remarkable marketing results, helping brand merchants achieve growth. Currently, the traffic pattern of different Internet platforms is becoming more solidified. The company's 5G rich media messaging, with its massive user scale, native applications, and strong reach characteristics, helped merchants carry out more intuitive and rich brand promotion and considerable traffic transformation during the Double Eleven period, achieving high-quality growth, and remarkable marketing results. According to the official account of Dream Network Technology, in some of the company's activities during the Double Eleven period, the exposure rate of 5G rich media message red envelopes and cards and vouchers used to promote new activities was higher than 50%, and the click-through rate reached as high as 20.75%; the exposure rate of 5G rich media messages used for traffic conversion was in the 45%-70% range, with a click-through rate as high as 34.39%.
New businesses such as AI+Hongmeng+data services have blossomed in many places, and the future can be expected. The company continues to develop a number of new businesses, including signing a business cooperation framework agreement with the HUAWEI Cloud Pangu model, and building “AI+5G messaging” in conjunction with Huawei's Pangu model, which will integrate HUAWEI Cloud artificial intelligence messaging products to further build AI shopping guide robot products and intelligent creation tools for “tips and tricks”; some products have been adapted based on the Hongmeng system and will continue to deepen cooperation with Huawei; the display and tracking capabilities of thousands of people help customers achieve personalized scenario marketing and services through their own data mining, and The AI platform helps customers connect with their internal applications and achieve a package of business upgrades for data mining, customer profiling, and accurate distribution. Many of the company's new businesses are deeply cultivated around the messaging business, giving full play to its strengths in the field of messaging marketing, and continuously expanding new business boundaries.
Earnings forecasts, valuations and investment ratings. Considering that the operator's 5G news has been implemented and is entering a demand release period next year, Apple's addition of 5G news is expected to further enhance the company's performance growth momentum next year. We expect the company's operating income from 2023 to 2025 to be 53.86, 69.06 and 7.855 billion yuan, respectively. The net profit attributable to the parent company is 1.01, 4.85 and 664 million yuan respectively, corresponding to EPS of 0.13, 0.60 and 0.82 yuan, respectively, maintaining a “strong push” rating.
Risk warning: Macroeconomic trends and policies have fallen short of expectations, operator SMS prices have continued to rise, poor management has led to continued calculation of goodwill and asset impairment preparations, and the progress of new businesses such as 5G messaging has fallen short of expectations.