Incident: The company announced its 2023 results, achieving operating income of 507.8 billion yuan, up 6.9% year on year, of which service revenue was 465 billion yuan, up 6.9% year on year, and continued to grow for 11 consecutive years; net profit to mother was 34 billion yuan, up 10.3% year on year.
Here are our reviews:
The basic business is growing steadily, and the production and production business is developing rapidly
The company's basic business revenue grew steadily in 2023, and the user scale and value continued to increase. Mobile communications service revenue was 195.7 billion yuan, up 2.4% year on year. Among them, mobile value-added and application revenue was 25.8 billion yuan, up 12.4% year on year, and the net number of mobile users increased by 16.59 million, leading the industry for six consecutive years. The number of users reached 408 million, and the mobile user ARPU reached 45.4 yuan, an increase of 0.4% year on year. Revenue from fixed network and smart home services was 123.1 billion yuan, up 3.8% year on year. Among them, smart home business revenue was 19 billion yuan, up 12.8% year on year, the net number of broadband users increased by 9.26 million to 190 million households, and the comprehensive broadband ARPU reached 47.6 yuan, up 2.8% year on year.
In 2023, the company's production volume business maintained rapid development, with revenue reaching 138.9 billion yuan, up 17.9% year on year, accounting for 29.9% of service revenue, an increase of 2.8p.p over the previous year. The incremental contribution to service revenue increased to 70.4% from 51.6% in 2021. The company's Tianyi Cloud revenue reached 97.2 billion yuan, an increase of 67.9% over the previous year, and international business revenue exceeded 13.7 billion yuan.
Accelerate the upgrading of digital information infrastructure to intelligence, and focus on optimizing the future investment structure. In 2023, a total capital expenditure of 98.8 billion yuan was completed, including 34.8 billion yuan in mobile networks and 35.5 billion yuan in industrial digitalization. More than 220,000 5G base stations were built during the year, and more than 1.21 million 5G base stations were being used, achieving continuous coverage in townships and above; the number of 4G medium frequency shared base stations exceeded 2 million, with an intermediate frequency sharing rate of over 90%. They jointly promoted the precise construction and optimization of key scenarios such as airports, high-speed rail, hospitals, etc., steadily improved mobile network quality satisfaction, and further released the benefits dividends of joint construction and sharing. The company is actively promoting the recultivation of 800 MHz. In August 2023, it was approved to re-cultivate the 800 MHz frequency for 5G. As of January 2024, 250,000 800 MHz base stations with 4/5G integrated service capabilities have been built, and network coverage and user experience in rural areas have improved markedly. Actively build distributed computing power infrastructure that integrates cloud intelligence, training and promotion, and cloud network edge collaboration, focus on the national integrated computing power network hub area, increase intelligent computing capacity building. Intelligent computing added 8.1 EFLOPS throughout the year, reaching 11.0 EFLOPS, an increase of 279.3%; promote the transformation and upgrading of data centers to AIDC, actively build next-generation data centers that support the “two bombs and one excellent” wind and liquid mixing model, and achieve elastic adaptability with an average power of 2 kW-50 kW+ in a single cabinet; steadily advancing the construction of general computing power, covering 280 cities with one pool There were more than 1,000 edge nodes, and a total of 1.0EFLOPS was added throughout the year, reaching 4.1EFLOPS, an increase of 32.3%.
By optimizing the investment structure in 2024, the planned capital expenditure was 96 billion yuan, down 2.9% from the previous year, and the capital expenditure ratio is expected to fall below 20%, including 29.5 billion yuan in mobile networks and 37 billion yuan in industrial digitization, accounting for 38.5%, an increase of 2.5 percentage points over the previous year. Investments in cloud/ computing power were 18 billion yuan, and intelligent computing increased by 10 EFLOPS, reaching more than 21 EFLOPS.
Attach great importance to shareholder returns and continue to increase dividends
The company attaches great importance to shareholder returns and strives to enhance its ability to generate profits and cash flow. The dividend for the full year of 2023 was 0.2332 yuan (tax included), and the total amount of dividends distributed throughout the year increased 19.0% year-on-year, exceeding 70% of the company's shareholders' profit share share in 2023, successfully fulfilling the company's profit distribution promise when issuing A shares. Starting in 2024, profits distributed in cash within three years will gradually increase to more than 75% of the profits due to shareholders in that year, in an effort to create greater value for shareholders.
Profit forecasting and investment suggestions: The company seizes opportunities for economic and social digital transformation, comprehensively and thoroughly implements the “cloud to digital transformation” strategy, integrates with new elements such as cloud, AI, security, and quantum. The basic business is growing steadily, and the industrial digital business is developing rapidly, and the company's future development is optimistic. Considering the uncertainty about the profitability of the new business, net profit due to mother is estimated to be 332/360/38.8 billion yuan in 24-26 (the original value was 346/38.2 billion yuan in 24-25), maintaining the “incremental” rating.
Risk warning: industry competition intensifies, innovative business progress falls short of expectations, cost growth exceeds expectations, etc.