Key points of investment
The company's total profit achieved double-digit growth in the 1st quarter of '24
In the first quarter of 2024, the company's performance grew steadily. Operating revenue reached 99.496 billion yuan, up 2.3% year on year, and main business revenue reached 89.042 billion yuan, up 3.4% year on year; total profit reached 7.169 billion yuan, up 10.0% year on year, maintaining double digit growth rate. Net profit to mother was 2,447 billion yuan, up 8.0% year on year.
Coordinated development of the two main businesses, increasing scale and value simultaneously
The company accelerated the expansion and value increase of the network communication business. The 24Q1 network communication business achieved revenue of 62.304 billion yuan, of which: 337 million mobile users, 269 million 5G package users, and the 5G package penetration rate increased to 80%; 115 million fixed-line broadband users, a net increase of 2.11 million gigabit users, and a net increase in gigabit broadband penetration rate to 23%.
The share of computing network digital intelligence business continued to rise. 24Q1 achieved revenue of 23.215 billion yuan, accounting for 26.1% of main revenue, and the revenue structure was continuously optimized. Among them: Unicom's cloud business achieved rapid growth, with revenue reaching 16.7 billion yuan, up 30.3% year on year; data center revenue reached 6.6 billion households, up 4.1% year on year; Internet communication security revenue achieved 70% rapid growth; and the cumulative number of virtual private network service customers in the 5G industry reached 1,030.
The company promotes the coordinated development of the two main businesses. The network communication business achieves value improvement on the basis of continuously expanding the number of users. The computing network digital intelligence business is based on the collaborative advantages of cloud networks and data resources, consolidates the digital intelligence capabilities of the computing network, and promotes the company's development transformation and model transformation with new quality productivity. It is expected that it will continue to contribute to growth momentum in the future.
Improve profitability, increase R&D and consolidate the foundation for development
Benefiting from good cost and expense control, 24Q1's profitability continued to increase. The weighted average return on net assets was 1.48%, up 0.06pp year on year, gross sales margin increased 0.13pp to 24.54% year on year, and net interest rate increased 0.27pp to 5.59% year on year. The company's internetwork settlement costs were -3.0% year-on-year, accounting for -0.2pp year-on-year change in service revenue; -0.5% year-on-year change in service revenue ratio; +7.0% year-on-year change in network operation and support costs, accounting for +0.6pp year-on-year change in service revenue ratio; labor costs -5.7% YoY, accounting for -1.6pp year-on-year change in service revenue ratio.
The sales expense ratio, management expense ratio, and financial expense ratio were 8.88%/4.71%/-0.05%, respectively, with year-on-year changes of -0.02pp/ -1.10pp/-0.07pp. The company focuses on R&D investment, increasing research on core technology, and building a solid foundation for innovation, transformation and long-term development. R&D expenses increased 19% year-on-year in the first quarter, R&D expenses increased 0.19pp, and authorized patents reached 362, a steady increase over the previous year.
Profit forecasting and valuation
Revenue growth is expected to be 4.7%, 4.5%, and 4.5% in 2024-2026, and net profit growth rates of 10.7%, 10.2%, and 10.1%, corresponding to PE 17.02, 15.44, and 14.03 times, maintaining the “buy” rating.
Risk warning
The increase in basic business users fell short of expectations; competition in innovative businesses intensified; cost control fell short of expectations; dividend payments fell short of expectations, etc.