Incident: On March 20, the company released its annual report. In 2023, it achieved operating income of 372,597 billion yuan, up 5% year on year; realized net profit of 8.173 billion yuan, up 12% year on year; net profit after deducting non-return to mother was 7.493 billion yuan, up 12.2% year on year; net cash flow from operating activities was 104.342 billion yuan, up 2.6% year on year.
Basic earnings per share were $0.261.
The basic network communication business is stable, and the number of users has exceeded expectations. The company's networked communications business includes six major segments: mobile networking, broadband networking, television networking, dedicated line networking, communications business and information business. It achieved revenue of 244.6 billion yuan, accounting for three-quarters of the total revenue. The increase in the number of users exceeded expectations: 1) The number of mobile users reached 333 million, and the net increase of users reached 10.6 million in 2023. The net increase in users increased by 90% over the same period last year. The user structure continued to be optimized, and the 5G package user penetration rate reached 78%, an increase of 12 pcts over the previous year. 2) The number of fixed-line broadband users reached 113 million, a net increase of 9.79 million over the previous year, and the net increase reached a record high in nearly ten years. The user structure was significantly improved. The broadband user integration penetration rate reached 76%, and the gigabit user penetration rate reached 22%, an increase of 6 pcts over the previous year. 3) Information business revenue of 10.7 billion yuan, an increase of 16.2% over the previous year. Among them, the number of personal digital smart lifestyle users reached 99.23 million, and the number of Unicom Smart Home business users reached 102.96 million.
The digital intelligence business contributes new growth points and broadens the growth poles of innovation and transformation. The company's computing network digital intelligence business includes the six major sectors of Unicom Cloud, data center, mathematical integration, data services, digital intelligence applications and Internet communication security. In 2023, it achieved revenue of 75.2 billion yuan, accounting for about a quarter of the total revenue of the two main businesses, and brought more than half of the company's new revenue. 1) Unicom Cloud achieved revenue of 51 billion yuan, an increase of 41.6% over the previous year. The company's cloud resource sales exceeded one million cores, an increase of 186% over the previous year, and the cloud resource coverage exceeded 230 cities. 2) Data services achieved revenue of 5.3 billion yuan, an increase of 32% over the previous year. Data services have had an industry share of over 50% for 5 consecutive years. Build the digital government's preferred brand, build 15 provincial government big data platforms, and serve more than 800 smart cities in total. 3) Digital intelligence application revenue reached 5.6 billion yuan, an increase of 17.5% over the previous year. The total number of 5G industry application projects has reached 30,000, covering 71 major categories of national economy, and serving more than 8,500 5G private network customers. During MWC 2024, it won three GLOMO Global Mobile Awards, leading the high-quality development of 5G digital intelligence applications. 4) Internet communication security revenue reached 1.7 billion yuan, an increase of 120% over the previous year. Build a new “platform+component+service” integrated security operation service model based on the “MoAttack” platform, built the first large-scale urban digital security operation center in China for customers, and launched more than 50 benchmark projects.
CAPEX has reached an inflection point, and the dividend ratio is expected to continue to rise. Capital expenditure in 2023 was $73.9 billion, down 0.4% year over year. 5G intermediate frequency base stations have exceeded 1.21 million, 900M base stations have reached 680,000 stations, and mobile network coverage continues to improve. Among them, 220,000 new 5G intermediate frequency base stations were built in 2023, and more than 2 million 4G shared base stations were added. Through joint construction and sharing with friends and merchants, operating expenses were saved by about RMB 39 billion in 2023, carbon emissions were reduced by about 11.5 million tons, and a total capital cost savings of about RMB 340 billion.
Capital expenditure is expected to be no more than $65 billion in 2024, down 12% year over year. A dividend of $0.3366 was distributed per share for the full year of 2023, with a dividend ratio of 55%.
Investment suggestions: The company insists on steady progress, thoroughly implements the five major enterprise strategies of a strong technology enterprise, a strong talent enterprise, a strong digital intelligence enterprise and a strong brand enterprise, and thoroughly implements the nine key action plans for networked communication development, integrated computing and network development, digital intelligence application development, international development, big data innovation, artificial intelligence innovation, new digital infrastructure, high quality service and Internet communication security, and accelerate to become a world-class technology service enterprise with global competitiveness. We expect the company to achieve operating income of 4023.77/4305.29/456.365 billion yuan in 2024/25/26, an increase of 8%/7%/6% year-on-year; net profit to mother of 91.5/101.44/11175 billion yuan, an increase of 12%/11%/10% year-on-year. Maintain a “Highly Recommended” investment rating.
Risk warning: industry regulatory policy risks, market competition intensifies risks, satellite Internet investment demand exceeds expectations