Incidents:
On May 31, the Shanghai Stock Exchange and China Securities Index Co., Ltd. decided to adjust the sample indices of the SSE 50, SSE 180, SSE 380, and Science and Innovation 50, which will take effect after the market closes on June 14, 2024. Among them, the SSE 50 Index replaced 5 samples, and China Mobile and other companies were allowed to transfer to the SSE 50 Index.
Furthermore, the company promised to further promote a high dividend rate, and promised to raise the dividend rate to over 75% by 2026. Corresponding to current stock prices and our profit forecast, the company's dividend rate is expected to reach 4.7% this year, maintaining a “buy” rating.
Various businesses grew steadily in the first quarter of 2024: The company released its 2024 quarterly report, and Q1 achieved operating income of 263.7 billion yuan, +5.17% year over year; net profit to mother of 29.6 billion yuan, +5.49% year over year; net profit after deducting non-return to mother was 26.1 billion yuan, +8.40% year over year. The performance was in line with expectations. By business: In terms of personal business, mobile business customers increased net in several quarters from 4.63 million to 996 million, 5G package customer penetration rate reached 80.2%, 5G network customer penetration rate increased 2.07 percentage points to 49.0% month-on-month; mobile ARPU value increased 6.7% to 47.9 yuan/household/month; in the household market, comprehensive ARPU increased 1.8% year-on-year to 39.9 yuan/household/month; the government and enterprise market grew rapidly, accelerating the expansion of the “network+cloud+dict” scale to expand the customer market and promote the digital transformation of government and enterprise Tall Quality development, DICT business achieved good growth.
Traditional capital expenditure continues to decline, and R&D investment continues to rise, accelerating the layout of the AI industry: According to company guidelines, capital expenditure in 2024 is expected to be 173 billion yuan, a year-on-year decrease of 4%; of these, capital expenditure on computing power bucked the trend and is expected to reach 47.5 billion yuan. Furthermore, China Mobile's R&D expenditure rate has continued to rise in the past two years, rising 0.9 percentage points to 2.8% year on year in 2023, which also shows the company's determination to fully promote investment in computing power and AI-related industries. Over the past few years, China Mobile's innovation capabilities have greatly improved, and it is responsible for building a number of national carriers such as the National Engineering Research Center and the National Artificial Intelligence Open Innovation Platform. Focus on major national science and technology projects and continue to lead the development of next-generation communication technology such as 5G and 6G. The pioneering proposed computing power network has moved from a conceptual prototype to industrial practice. The smart platform uses more than 150 billion times a year, the original innovation capacity is continuously strengthened, and the value of innovation is released in an orderly manner. We believe that as a leading domestic operator, Mobile is expected to use the advantages of operators to further lay out the computing power industry chain and enter the AI service business, providing new growth space for future digital transformation.
The dividend ratio continues to rise, and the core dividend assets of central enterprises under the new “Nine Rules”: the company said that within three years from 2024, the cash dividend rate will be further raised from 70% to 75%; the increase in the company's dividend rate sets an example for central enterprises to manage market value and increase cash dividend strength. It also takes the lead in responding to the new “Nine Rules” that “focus on the high-quality development of listed companies, enhance investment value while strengthening investor protection, and strengthen cash dividend supervision of listed companies.” We believe that the company, as a leading operator and central enterprise, will significantly benefit from the process of reshaping the central enterprise valuation system and implementing the new “Nine Rules of the State” in the future. Furthermore, the company promised to raise the dividend rate to over 75% by 2026, and the relevant dividend rate is in a high position. Corresponding to the current stock price, the dividend rate is expected to reach 4.7% this year, and the company's market capitalization performance is worth paying attention to.
Profit expectations: We expect the company's net profit for 2024-2026 to be 144.4 billion yuan, 1549 billion yuan, and 166.5 billion yuan respectively; the YOY will be +9.60%, +7.24%, and +7.53%, respectively; EPS will be 6.75 yuan, 7.24, and 7.78 yuan respectively. The current stock price corresponds to the 2024-2026 P/E for A shares is 16/15/14 times, and the 2024-2026 P/E for H shares will be 10 times 11/11/11/10 times, maintaining the “buy” proposal.
Risk warning: 1. 5G applications fall short of expectations; 2. Competition within operators continues to reduce fees and speed up competition.