Description of the event
Recently, the company released its 2023 annual report. In 2023, the company achieved revenue of 1009.3 billion yuan, up 7.7% year on year; net profit to mother was 131.8 billion yuan, up 5.0% year on year.
Incident comments
Revenue surpassed trillion dollars and profit reached a record high, leading to continued good growth. In 2023, the company achieved revenue of 1009.3 billion yuan, an increase of 7.7% over the previous year, breaking the trillion mark; achieved main business revenue of 863.5 billion yuan, an increase of 6.3% over the previous year, higher than the industry average; achieved net profit of 131.8 billion yuan, an increase of 5.0% year on year. Profit reached a record high, and ROE continued to remain stable. In the 23Q4 alone, the company achieved operating income of 233.7 billion yuan, a year-on-year increase of 9.3%, achieved main business revenue of 1989 billion yuan, a year-on-year increase of 3.6%, and realized net profit of 260 million yuan, a year-on-year decrease of 2.5%, mainly due to a sharp increase of 113% year-on-year in R&D expenses in Single Q4. The company guidelines strive to achieve good growth in revenue and profit in 2024.
ARPU continues to grow steadily, and mobile cloud revenue will break 100 billion dollars. In terms of traditional business, mobile ARPU reached 49.3 yuan, up 0.6% year on year, and Jiakuan's comprehensive ARPU reached 43.1 yuan, up 2.4% year on year. On the basis of maintaining a steady increase in the number of users, they all achieved steady growth in ARPU. At the same time, the company guided the steady growth of mobile ARPU and Jiacuan comprehensive ARPU in 24 years. In terms of emerging businesses, mobile cloud revenue was 83.3 billion yuan, up 65.6% year on year. The public cloud share ranking rose one step further to 5th place. The target revenue growth of mobile cloud will remain above 30% in 2024, and revenue may break 100 billion dollars.
R&D investment continues to increase, and the 5G depreciation cycle lengthens. In 2023, the company's R&D expenses reached 28.7 billion yuan, an increase of 58.7% over the previous year. The details of the increase mainly came from related employee remuneration, which increased 107.4% year on year. The company continued to increase investment in R&D and strengthen core capacity building. Furthermore, considering that 6G will collaborate with 5G for networking after commercialization, 5G devices still have a long life cycle. The company announced that the depreciation period for 5G wireless and related transmission equipment will be adjusted from 7 years to 10 years starting January 1, 2024. It is expected that this accounting change will reduce the depreciation amount of the company's fixed assets by about 18 billion yuan in 2024.
CAPEX guidelines have declined slightly, increasing investment in computing power and capacity. In 2023, the company completed capital expenditure of 18.3 billion yuan, which is lower than the guideline value at the beginning of the year. The company guides capital expenditure of 173 billion yuan in 2024, down 4% year on year, of which computing power investment was 47.5 billion yuan, up 21.5% year on year, and capacity investment was 16.3 billion yuan, up 21.6% year on year. In terms of computing power planning, the company's intelligent computing (FP16) computing power will be added at least 7 EFLOPS to 17 EFLOPS in 24 to ensure industry leadership in scale.
New dividend payment guidelines have been implemented, and cash flow has remained healthy and abundant. The company fulfilled its dividend payment promise, increasing the dividend rate to 71% in 2023, and announced a new dividend policy: the dividend payout rate will gradually increase to over 75% over three years from 2024. In terms of cash flow, the company's operating cash flow increased 8.2% year on year, free cash flow increased 29.2% year on year, further consolidating cash strength.
Investment advice: In 2023, the company's revenue surpassed the trillion mark, and profits reached a record high. In terms of traditional business, ARPU has achieved steady growth on the basis of maintaining a steady increase in the number of users; mobile cloud is growing rapidly, and revenue is expected to exceed 100 billion dollars in 24 years. The slight decline in CAPEX guidance will increase investment in computing power and capacity. The guidelines for the whole year are clear, and the goal is to achieve good revenue and profit growth, and ARPU continues to grow steadily. With the implementation of the new dividend payment guidelines, the dividend payout ratio will be further increased.
The company's net profit for 2024-2026 is estimated to be 1405 billion yuan, 148.1 billion yuan, and 155.8 billion yuan, corresponding to year-on-year growth rates of 6.6%, 5.4%, and 5.2%, corresponding to 16 times, 15 times, and 14 times PE. It is recommended and maintains a “buy” rating.
Risk warning
1. Traditional business ARPU growth falls short of expectations;
2. Competition in industrial digitalization business intensified.