Matters:
On April 22, China Mobile released the “2024 Quarterly Report”. 2024Q1's revenue was 263.707 billion yuan, up 5.17% year on year, and net profit to mother was 29.609 billion yuan, up 5.49% year on year.
Commentary:
Revenue performance achieved good growth. In the first quarter of '24, the company achieved revenue of 263.707 billion yuan, a year-on-year increase of 5.17%, and net profit to mother of 29.609 billion yuan, an increase of 5.49% over the previous year. Both achieved good growth, and the overall operation maintained steady and good development. Profitability increased, with gross sales margin of 26.17%, up 1.71 percentage points year on year. Net profit margin attributable to shareholders of the parent company was 11.24%, a slight increase of 0.04 percentage points year over year.
The basic market for mobile and broadband services continues to be consolidated, and the second growth curve has maintained good growth. 1) In terms of the individual market, adhere to the integration and expansion of “connection+application+equity”, improve the existing customer operation system, continue to strengthen scenario operations, deepen integrated development, and further consolidate the scale and value foundation of growth. As of 2024Q1, the company had a total of 996 million mobile customers, including 799 million 5G package customers and 488 million 5G network customers; Q1 mobile Internet traffic increased 3.3% year-on-year, and mobile Internet DOU reached 14.9GB; and mobile ARPU was RMB 47.9, an increase of 3 yuan over 23Q4. 2) In the household market, build a “full gigabit+ cloud life” smart home ecosystem, promote the large-scale development of home security, mobile HD, and intelligent networking, upgrade the smart home ecosystem, and enhance the value contribution of HDICT. As of March 31, 2024, the total number of the company's wired broadband customers reached 305 million, with a net quarterly increase of 6.83 million, including 269 million household broadband customers, with a net quarterly increase of 5.28 million. In the first quarter, the comprehensive ARPU for household customers was RMB 39.9, an increase of 1.8% over the previous year. 3) On the government and enterprise market side, promote “network+cloud+DICT” scale expansion, increase commercial market expansion efforts, promote standardization, commercialization and platformization of government and enterprise solutions, deepen industry digital intelligence services, and promote high-quality development. 2024Q1's DICT business revenue continued to grow well.
The development trend is good throughout the year. Capital expenditure and depreciation are expected to decline, enhance the company's performance, and have stable and high dividend returns. Previously, the company disclosed that its capital expenditure plan for the year was 173 billion yuan, down 4% from the previous year, and the revenue ratio is expected to fall below 20%. Among them, investment in computing power has increased. Recently, it has issued a bid to purchase 7,994 AI training servers to build a new intelligent computing center to strengthen the computing power layout and focus on future development. Furthermore, considering that the 6G network architecture will maximize the investment in 5G networks, 5G and 6G will be connected together, and 5G devices have a long life cycle, approved a change in the depreciation period for 5G wireless and related transmission equipment from 7 years to 10 years, which will reduce the depreciation amount of the company's fixed assets by about 18 billion yuan in 2024.
The decline in capital expenditure and depreciation is expected to enhance full-year performance. At the same time, starting in 2024, the company plans to gradually increase profits distributed in cash within three years to more than 75% of the profits due to shareholders in the current year to better give back to shareholders and share development results, and the company has stable high dividend income.
Investment advice: We expect the company's net profit to be 1400.59/1491.47/158.288 billion yuan in 2024-2026, and EPS of 6.55/ 6.97/7.40 yuan respectively, maintaining the “recommended” rating.
Risk warning: Macroeconomic downturn risk, 5G or gigabit network penetration rate falls short of expectations, ARPU value increases less than expected, digital transformation business development falls short of expectations