Description of the event
Recently, the company released its 2023 annual report. In 2023, the company achieved revenue of 507.8 billion yuan, an increase of 6.9% over the previous year; net profit to mother was 34 billion yuan, an increase of 10.3% over the previous year.
Incident comments
Profits achieved double-digit growth, and revenue growth from single Q4 services was impressive. In 2023, the company achieved revenue of 507.8 billion yuan, a year-on-year increase of 6.9%, communications service revenue of 465 billion yuan, a year-on-year increase of 6.9%, and net profit to mother of 34 billion yuan, an increase of 10.3% over the previous year, and continued double-digit growth in profit. In the 23Q4 alone, the company achieved revenue of 126.7 billion yuan, up 8.2% year on year, and consolidated revenue of 115.2 billion yuan, up 8.4% year on year. The increase was impressive. Net profit to mother was 3.3 billion yuan, an increase of 9.7% year on year.
ARPU continues to grow steadily, and the production volume business continues to grow rapidly. The company achieved mobile communication service revenue of 195.7 billion yuan, an increase of 2.4% over the previous year, and revenue from fixed network and smart home services of 123.1 billion yuan, an increase of 3.8% over the previous year. On the user side, there was a net increase of 16.59 million mobile users, leading the scale of net growth. The net increase of broadband users was 9.26 million throughout the year, a steady increase. On the ARPU side, mobile ARPU was 45.4 yuan, up 0.4% year on year, broadband ARPU was 39.1 yuan, up 2.1% year on year, and broadband comprehensive ARPU was 47.6 yuan, up 2.8% year on year, all continuing steady growth. The company achieved industrial digitization revenue of 138.9 billion yuan, an increase of 17.9% over the previous year, and maintained rapid growth, accounting for 29.9% of service revenue, an increase of 2.8 pct over the previous year.
Tianyi Cloud maintained rapid growth and was fully upgraded to an intelligent cloud. Tianyi Cloud achieved revenue of 97.2 billion yuan, an increase of 67.9% over the previous year. While maintaining leading scale, it grew the fastest, and was fully formed as Guoyun's framework. Focusing on the new requirements for cloud merchants in the big model era, Tianyi Cloud has fully upgraded to the intelligent cloud to create the Yunxiao integrated intelligent computing acceleration platform “Yunxiao” to provide extreme computing power and efficient operation and maintenance tools adapted to AI scenarios; launched the one-stop intelligent computing service platform “Huiju” to provide a one-stop, full-link, low-threshold, high-security training and promotion tool chain for big model developers; and upgrade the computing power distribution network platform “Xiyang” to fully support unified access, packaging and scheduling of computing power, and supercomputing to provide computing power and grid connectivity services for computing operators.
The CAPEX inflection point will now be, leading the industry in intelligent computing scale. In 2023, the company completed capital expenditure of 98.8 billion yuan, an increase of 6.8% over the previous year, which is basically in line with the guidelines at the beginning of the year. The estimated capital expenditure for 2024 was 96 billion yuan, down 2.9% year on year. The inflection point will now be reached. The structure is further skewed towards industrial digitalization. The related investment was 37 billion yuan, an increase of 3.9% over the previous year, of which 18 billion yuan was invested in cloud/ computing power. In terms of computing power planning, the company's intelligent computing scale reached 11.0 EFLOPS in 2023, and plans to add at least 10 EFLOPS to 21 EFLOPS or more in 2024, leading the scale industry, and comprehensively building AIDC for intelligent computing.
The dividend payout ratio is moving in line with clear operating and dividend payment guidelines for the next three years. In 2023, the company's dividend payout rate increased by more than 5 pct to 71%, and the dividend promise was clarified: the dividend payout rate will gradually increase to over 75% within 3 years from 2024, which is comparable to China Mobile's dividend payout rate. At the same time, the company clearly defines its goals for the next three years: service revenue to maintain good growth, and net profit growth is higher than revenue growth.
Investment advice: The company achieved double-digit profit growth in 2023, and revenue growth from single Q4 services was impressive. ARPU continues to grow steadily, and the production volume business continues to grow rapidly. Tianyi Cloud reached a scale of 100 billion and was fully upgraded to an intelligent cloud in the big model era.
The CAPEX inflection point will now be, leading the industry in intelligent computing scale. The operating and dividend payment goals for the next three years are clear, and high-quality development will be comprehensively promoted. The company's net profit for 24-26 is estimated to be 33.1 billion yuan, 35.6 billion yuan, and 38 billion yuan, corresponding to year-on-year growth rates of 8.6%, 7.7%, and 6.7%, corresponding to PE 17 times, 16 times, and 15 times PE. The main recommendation is to maintain the “buy” rating.
Risk warning
1. The increase in traditional business ARPU falls short of expectations;
2. Competition in industrial digitalization business intensified.