Key points of investment
Incident: On March 21, 2024, China Mobile released its 2023 annual report. For the full year of 2023, China Mobile achieved operating income of 1009.3 billion yuan, an increase of 7.7% over the previous year, and realized net profit of 131.8 billion yuan, an increase of 5.0% over the previous year. The basic earnings per share were 6.16 yuan, an increase of 4.8% year on year.
The revenue scale reached the trillions of dollars, and profits reached a record high. In 2023, China Mobile's revenue reached 1009.3 billion yuan, up 7.7% year on year, of which main business revenue reached RMB 863.5 billion, up 6.3% year on year, higher than the industry average; thanks to good revenue growth and better cost control, the company achieved net profit of 131.8 billion yuan in 2023, up 5.0% year on year, a record high. Profit per share was RMB 6.16 yuan, up 4.8% year on year, and profitability continued to maintain the leading level of world-class operators; the company's balance ratio was 33.0%, up 6.3% year on year, higher than the industry average. Strong capacity; the cash flow situation continues to be healthy, with free cash flow of 123.5 billion yuan, an increase of 29.2% over the previous year. CHBN grew across the board. Revenue from digital transformation reached 253.8 billion yuan, up 22.2% year on year, accounting for 29.4% of main business revenue. The revenue structure continued to be optimized, and the new momentum of the “second curve” grew strongly, laying a solid foundation for long-term sustainable development.
Mobile cloud revenue reached 83.3 billion yuan, and digital transformation was the primary driver of revenue growth. Personal market revenue reached 490.2 billion yuan, up 0.3% year on year; mobile customers were 991 million, a net increase of 15.99 million. Among them, 5G package customers reached 795 million, a net increase of 180 million. Household market revenue reached 131.9 billion yuan, an increase of 13.1% over the previous year; the number of household broadband customers reached 264 million, a net increase of 2012 million households, leading the industry in net growth for many years. The penetration rate of gigabit home broadband customers was 30.0%, up 14.3 percentage points from the end of 2022. Government and enterprise market revenue reached 192.1 billion yuan, up 14.2% year on year. In 2023, the winning share of the public tender market reached 14.3%, up 3.0 pp year on year. Mobile Cloud steadily ranked first among domestic cloud service providers, with revenue reaching 83.3 billion yuan, up 65.6% year on year. Self-sufficient revenue increased by more than 100% year on year, and IaaS revenue share ranked in the top five in the industry.
Revenue from emerging markets reached 49.3 billion yuan, up 28.2% year on year, while international business revenue reached RMB 20.7 billion, up 24.2% year over year. In 2023, revenue from digital transformation contributed 89.7% to the increase in main business revenue, accounting for 29.4% of main business revenue, which is the number one driving force for the company's revenue growth.
Consolidate the foundation of digital intelligence transformation, and improve information service capabilities significantly. “Dual Gigabit” maintains the lead. In 2023, the total investment in 5G networks was 88 billion yuan, with a total of more than 1.94 million 5G base stations opened, including 620,000 700MHz 5G base stations; continued to expand pipeline coverage to help accurate marketing and promote priority deployment of 10G PON in gigabit communities. By the end of December 2023, 100% of OLTs in cities, counties, and 95% of rural OLT across the country had gigabit platform capabilities. The computing network infrastructure has been continuously upgraded. The data center capacity covers all of the country's “East Digital and Western Computing” hubs, and the general computing power scale has reached 8 EFLOPS (FP32), building the world's first large-scale inter-provincial backbone 400GOTN network, and creating a “1-5-20ms” three-level computing power delay circle. Continuously improve the competency center and platform empowerment system. The total number of applications reached 580.7 billion times per year, supporting the whole society to “go to the cloud and use numbers to empower wisdom” and promoting the company's internal cost reduction and efficiency. Currently, the company is actively participating in the construction of the national big data system, enriching the “Big Data +” product system, and unblocking the big cycle of data elements.
CAPEX was reduced and the layout was skewed towards computing power, and cash dividends will account for more than 75% within 3 years starting 2024. The company always adheres to forward-looking planning and accurate investment, consolidates the foundation of digital intelligence development, strongly supports CHBN's growth, makes detailed resource management, enhances digital intelligence, improves project management, further optimizes the investment structure, strengthens investment control, classification management and energy saving and environmental protection throughout the process, guarantees investment efficiency, and promotes green and low carbon. The total capital expenditure of the company in 2023 is approximately RMB 1803 billion, and the total capital expenditure for 2024 is estimated to be approximately RMB 173 billion, mainly to promote leading connectivity perception, accelerated computing power development, capacity intensive efficiency and infrastructure expansion layout, and support CHBN's business development. Among them, the 5G network capital expenditure is approximately RMB 69 billion, and the capital required mainly comes from cash flow from operating activities. In order to better give back to shareholders and share development results, the board of directors of the company recommended a dividend rate of 71% for the full year of 2023. At the same time, the company fully takes into account profitability, cash flow conditions and future development needs. Starting in 2024, profits distributed in cash will gradually increase to more than 75% of the profits that shareholders should account for that year, and strive to create greater value for shareholders.
Investment advice: As the telecom operator with the largest number of domestic users, China Mobile is focusing on building a high-quality information service supply system. The four major markets have performed well, the layout of new fields and new tracks is beginning to show results, and its leading position in the industry has been consolidated. Considering factors such as the company's high 5G penetration rate and future business layout adjustments, we adjusted the profit forecast. The company's 2024-2026 revenue is 10850.07/11609.58/12399.03 (2024-2025 original value is 11354.78/12469.30) billion yuan, up 7.5%/7.0%/6.8% year-on-year, and net profit to mother is 1416.36/1518.47/1624.95, respectively (the original value for 2024-2025 is 1469.21/ (158.474) billion yuan, up 7.5%/7.2%/7.0% year on year, corresponding EPS was 6.62/7.10/7.59 yuan, PE was 15.5/14.5/13.5, maintaining the “increase holdings - B” proposal.
Risk warning: Industrial Internet business development falls short of expectations; 5G business development falls short of expectations; shared co-construction falls short of expectations, etc.