Net profit grew well in 2023. In 2023, the company achieved revenue of 1009.3 billion yuan (+7.7% YoY), achieving net profit of 131.8 billion yuan (YoY +5.0%); achieved operating income of 233.7 billion yuan (+9.4% YoY) in the fourth quarter, achieving net profit of 26.3 billion yuan (-2.5% YoY). The company guides positive revenue and profit growth in 2024.
Deepening strategic transformation, the “second curve” has strong growth momentum. The company achieved digital transformation revenue of 253.8 billion yuan (+22.2% year over year), accounting for an increase of 3.8 pct to 29.4% of the total revenue ratio of the general service. The government and enterprise market achieved revenue of 192.1 billion yuan (+14.2% year over year), and the number of government and enterprise customers reached 28.37 million. Among them, Mobile Cloud achieved revenue of 83.3 billion yuan (+65.6% year over year), leading to a growth rate of more than 30% in 2024.
The ARPU in the personal market and household market is rising steadily. In the individual market, the number of 5G package customers in the company reached 795 million, and the number of 5G network customers reached 465 million; mobile ARPU was 49.3 yuan, an increase of 0.6% over the previous year. In the household market, the company's wired broadband customers reached 298 million, including 264 million home broadband customers; the comprehensive ARPU for home customers was 43.1 yuan, an increase of 2.4% over the previous year. The company guides the continuation of the steady growth trend of integrated mobile and home ARPU in 2024, with a net increase in the number of 5G network customers and 18 million home broadband customers, respectively.
Investment in computing power has been strengthened, and planning and intelligent calculation capabilities have been significantly improved. In terms of capital expenditure, the company completed an investment of 1803 billion yuan in 2023 (slightly lower than the previous guideline of 183.2 billion yuan), and plans to invest 173 billion yuan in 2024.
Among them, the 5G network investment plan is 69 billion yuan (-21.6% YoY), and the computing power planning investment is 47.5 billion yuan (+21.5% YoY). The company plans to achieve cumulative total (FP32) computing power of 9 EFLOPS (increase of 1 EFLOPS year over year) and intelligent computing (FP16) computing power > 17 EFLOPS (increase of about 7 EFLOPS year over year) by the end of 2023.
The plan is to gradually increase the dividend payout ratio to over 75% over 3 years. The Board recommended a dividend payout rate of 71% for the full year of 2023, corresponding to a final dividend of HK$2.40 per share. Together with the interim dividend already paid, the total dividend for the full year of 2023 was HK$4.83 per share, an increase of 9.5% over 2022. The company plans to gradually increase profits distributed in cash within three years starting in 2024 to more than 75% of the profits due to shareholders in that year.
Risk warning: 5G development falls short of expectations; industrial Internet business development falls short of expectations; computing power network deployment falls short of expectations.
Investment advice: Based on the company's guidelines, the profit forecast for 2024-2025 was lowered, and the profit forecast for 2026 was added. The company's net profit for 2024-2026 is estimated to be 1409/1483/156.2 billion yuan respectively (the 2024-2025 forecast is 1482/162.9 billion yuan before adjustment), the PE corresponding to the current A share price is 16/15/14x and the corresponding PB is 1.7/1.6/1.6x, respectively; the PE corresponding to the current H share price is 11/10/10x, and the corresponding PB is 1.1/1.0/1.0x, respectively, maintaining a “buy” rating.