Loss reduction in '23, downstream slowed in Q1 '24
The company released its annual report for the year 23 and the quarterly report for '24. It achieved operating income of 7.848 billion yuan, an increase of 13% over the previous year, and net profit to mother of -357 million yuan, a year-on-year loss of about 317 million yuan, which is better than the express report of -370 million yuan. The company continues to strengthen the dynamic control of budget execution. Costs and expenses as a share of revenue fell 2.5 percentage points year-on-year, and the quality of operations continued to improve. In the first quarter of '24, we achieved operating income of 969 million yuan, a year-on-year decrease of 29%, and net profit to mother of 159 million yuan, a year-on-year decrease of 524%, mainly due to the slowdown in telecom operators' construction plans and the impact of the macro environment.
System equipment revenue and gross margin both increased. The industry private network grew rapidly in 23 years by business segment: 1) System equipment revenue was 2.31 billion yuan, with a gross profit margin of 36%, up 2.6 pct year on year. The company's share increased significantly. In 2020, China Mobile's share of 5G wireless main equipment collection was only 2.62%, while the combined bid share of 5G 700M macro base stations and 2.6G/4.9G base station collection tenders from 2023 to 2024 exceeded 7%; 2) Tianfeed equipment was 1.13 billion yuan, up 6% year on year, gross profit margin 18%, up 1 pct year on year; 3) Indoor equipment was 510 million yuan, up 25% year on year, gross profit margin decreased by 1.5 pct; 4) Industry private network equipment and other revenue was 570 million yuan, up 23% year on year, gross profit margin increased 1.9 pct year on year; 5) mobile communication integrated services were 2.86 billion yuan, up 3% year on year, gross profit margin was 11%, down 0.8 pct year on year; 6) mobile communication network operation and maintenance service was 450 million yuan, up 25% year on year, gross profit margin was 14% year on year down 1.5 pct year on year.
Continuously deploy 5.5G, 6G and satellite fields
R&D investment in 2012 was 1.38 billion yuan, an increase of 3% over the previous year. 1) 5G-A is a critical stage in the evolution of 5G to 6G. 5G-A proposes clear technical goals for six major scenarios, including high-capacity communication, deterministic networks, satellite-terrestrial fusion, new IoT, integrated sensing, and real-time immersion. The first version of the 5G-A (R18) standard is expected to be frozen and commercialized in 2024, and we expect full commercial use in 2025.
The company actively participated in the formulation of the 3GPP R18 standard and pre-technical research for the R19 version, and took the lead in establishing 6 new international standards. 2) In the field of satellite Internet, the company continues to promote innovation in the standard system and maintain its leading edge in standard setting. The company's products such as space-borne base stations, satellite-terrestrial fusion core networks, and terrestrial communication stations have entered the product verification stage. The company has a rich array of satellite Internet products, and has the ability to provide a full range of products and technical services such as communication payloads, communication stations, core networks, network management and test instruments.
Profit forecasting and investment advice
According to the company's annual report and the first quarter situation, net profit due to mother for 2024-2026 is estimated to be 6 million yuan, 281 million yuan, and 409 million yuan respectively (the original forecast was 61.71 million yuan and 482 million yuan for 2024 and 2025, respectively). The company's domestic share of mobile communication equipment increased, and continued to lay out 5.5G, 6G and satellite fields, cultivate new growth points, and maintain the “gain” rating.
Risk warning: the risk of not being profitable; the risk of a large gap compared to leading international companies; the risk of high customer concentration; the risk that the 5G application business model is not yet mature.