In 2023, the company's revenue was 1.01 trillion yuan, +7.69% YoY, and net profit was 131.935 billion yuan, +5.03% YoY. 2024Q1 revenue was 263.07 billion yuan, +5.17% year over year, including main business revenue of 219.3 billion yuan, +4.5% year on year, other business revenue of 44.4 billion yuan, +8.6% year on year; net profit of 29.629 billion yuan, +5.51% year over year.

Personal and family businesses are growing steadily. Personal market revenue in 2023 was 490.199 billion yuan, +0.3% year-on-year.

Mobile ARPU was 49.3 yuan, +0.6% YoY. Household market revenue was 131,859 billion yuan, +13.1% year over year, and comprehensive ARPU was 43.1 yuan, +2.4% year over year. As of 24Q1, the number of mobile users reached 996 million, and the penetration rates of 5G package users and network users reached 80% and 49% respectively. The company expects a net increase of 80 million 5G network customers in 24.

Strengthen the AI+ strategic layout, and increase the cloud business. In 2023, government and enterprise market revenue was 192.12 billion yuan, +14.2% year-on-year, of which DICT revenue was 107.02 billion yuan, +23.8% year-on-year. The mobile industry's cloud revenue was 70.8 billion yuan, +72% year over year. Combined with personal and household cloud revenue, the overall mobile cloud revenue was 83.349 billion yuan, +66% year over year. Make every effort to accelerate breakthroughs in the “AI+” initiative, build a “1+N” professional model system, accumulate more than 450 AI capabilities such as intelligent speech recognition, natural language processing, machine vision, and intelligent analysis, and achieve continuous expansion of AI products and applications over 24 years.

The 24-year smart computing scale plan increased 70%, and overall capex declined further. Actual capital expenditure in 2023 was 18.3 billion yuan, -2.65% YoY, with a completion rate of 98%. Capital expenditure for 24 years is expected to be 173 billion yuan, -4% year over year. Specifically: connectivity investment of 87.4 billion yuan, of which 5G network investment was 69 billion yuan, -22% year over year; computing power investment was 47.5 billion yuan, +21% year over year, total computing power planning increased from 8 EFLOPS to 9 EFLOPS, and the intelligent computing power scale increased from 10 EFLOPS to 17 EFLOPS; capacity investment of 16.3 billion yuan, +22% year over year; basic investment of 21.8 billion yuan, +16% year over year.

With a high dividend ratio, the dividend payout was further enhanced, reaching 75% + within 3 years. The dividend payout ratio for the full year of 2023 was 71%, HK$4.83 per share, +9.5% YoY. At the same time, the company said that starting in '24, the company's dividend payout rate will reach more than 75% within 3 years.

Investment in R&D has been accelerated, and the depreciation policy has been adjusted since '24. The sales, management, and financial expenses rates in 2023 were 5.2%, 5.55%, and -0.34%, -0.09pct, -0.27pct, and +0.58pct, respectively. R&D expenses reached 28.711 billion yuan, +58.70% year-on-year. The company changed the depreciation period for 5G wireless and related transmission equipment from 7 years to 10 years starting in '24, which is expected to reduce the depreciation amount of fixed assets by 18 billion yuan in fiscal year 24.

Profit forecasting and investment advice. We expect the company's revenue in 2023-2025 to be 1.08 trillion yuan, 1.16 trillion yuan, and 1.23 trillion yuan, respectively, and net profit to mother of 141,197 billion yuan, 151,271 billion yuan, and 160.234 billion yuan, respectively. Referring to PB, the mainstream telecom operator in the world, the 2024 PB range was 1.7-1.9 times, corresponding to a reasonable value range of 106.84 yuan - 119.41 yuan, and the rating of “superior to the market” was given.

Risk warning. The progress of DICT's business fell short of expectations; the marginal improvement in the mobile business fell short of expectations.