Incidents:
On April 19, 2024, the company released its report for the first quarter of 2024: operating income of 99.496 billion yuan, up 2.3% year on year; net profit to mother of 2,447 billion yuan, up 8% year on year; net profit after deducting non-return to mother was 2,238 billion yuan, up 11.00% year on year.
The revenue structure continues to be optimized, and Unicom Cloud maintains rapid growth
The network digital intelligence business accelerates the company's development and transformation. 2024Q1, the company's computing network digital intelligence business revenue reached 23.215 billion yuan, accounting for 26.1% of the main business revenue, an increase of 1.1 pct over the end of 2023; Unicom's cloud business revenue reached 16.7 billion yuan, up 30.3% year on year; data center business revenue reached 6.6 billion yuan, up 4.1% year on year; the cumulative number of 5G industry virtual private network service customers reached 10030; the company focused on leveraging the collaborative advantages of cloud networks and data resources, and network communication security revenue achieved a rapid growth of 70%.
The level of 5G network coverage continues to improve, and the 5G package penetration rate has increased to 80%. The company is speeding up the construction of digital information infrastructure and implementing high-quality 5G development. 5G intermediate frequency base stations reached 1.27 million stations, an increase of 60,000 stations over the end of 2023; the number of mobile users reached 337 million, including 269 million 5G package users, and the penetration rate increased to 80%, an increase of 2 pcts over the end of 2023. The number of IoT connections reached 529 million, a net increase of 34.6 million; fixed broadband users reached 115 million, including a net increase of 2.11 million gigabit users, and the penetration rate increased to 23%, and the user structure improved markedly.
Profitability continues to improve, and the engine of scientific and technological innovation is strong
2024Q1's gross margin was 24.54%, up 0.13pct year on year; net margin was 5.59%, up 0.26pct year on year. The company's sales expense ratio, management expense ratio, and financial expense ratio decreased by 0.02/1.09/0.07 pct year on year, respectively; the company increased R&D investment intensity, and the R&D cost rate increased 0.2 pct year on year.
The company actively lays out emerging industries such as artificial intelligence, low-altitude economy, and digital intelligence applications, increasing scientific and technological innovation and core technology research, and accelerating the development of new quality productivity. The number of authorized patents reached 362 in the first quarter, and the number increased steadily.
Profit Forecasts, Valuations, and Ratings
The company's network communication business is developing steadily, and the network digital intelligence business continues to grow rapidly. We expect the company's revenue in 2024-2026 to be 4251.54/4421.35/472,564 billion yuan respectively, with year-on-year growth rates of 14.11%/3.99%/6.88%, respectively, and net profit to mother of 93.07/105.36/11.370 billion yuan, respectively, with year-on-year growth rates of 13.88%/13.21%/7.91%, EPS 0.29/0.33/0.36 yuan/share, respectively, for 3 years The CAGR is 11.64%. Given that the company firmly embraces the digital industry, the steady development of its core business, values shareholders' return on investment, and continues to increase the dividend payout rate, we gave the company 20 times PE in 2024, with a target price of 5.85 yuan, maintaining a “buy” rating.
Risk warning: Computing and digital intelligence business development falls short of expectations; increased competition has led to a decline in ARUP value; cost control falls short of expectations.