Incident: The company released its 2024 mid-year report, and achieved revenue of 546.7 billion yuan in the first half of the year, up 3.0% year on year, of which main business revenue reached RMB 463.6 billion, an increase of 2.5% year on year. Net profit attributable to shareholders of the parent company was 80.2 billion yuan, up 5.3% year on year; EBITDA was 182.3 billion yuan, down 0.7% year on year.
The interim dividend was HK$2.60 per share, up 7.0% year on year. It is planned that the proportion of profit distributed in cash for the full year as a share of the profit attributable to shareholders for the year will be further increased compared to 2023.
Overall revenue has been growing steadily. In the individual market, revenue was 255.2 billion yuan, down 1.6% year on year; mobile customers surpassed 1 billion, net increase of 9.26 million households; mobile ARPU was 51.0 yuan, down 1.4 yuan year on year. In the household market, revenue was 69.8 billion yuan, up 7.5% year on year; household broadband was 0.272 billion, a net increase of 8.48 million households; and broadband ARPU was 43.4 yuan, up 0.2% year on year. In the government and enterprise market, revenue was 112 billion yuan, up 7.3% year on year; the number of government and enterprise customers reached 30.38 million, a net increase of 2.01 million. In emerging markets, revenue was 26.6 billion yuan, up 13.2% year over year.
Gross margin increased significantly, and profitability further increased. The cost control effect was remarkable. In the first half of the year, the fixed asset network cost per 100 yuan fell 3.5% year on year, the energy consumption of a single 5G station fell 11.7% year on year, and 0.055 million employees were employed, reducing the cumulative burden by 1.54 million people per day. In the first half of the year, depreciation and amortization decreased 7% year over year, further saving main business costs. The consolidated gross profit margin for the first half of the year was 30.81%, up 2.0pct year-on-year. The annualized return on net assets reached 12.0%, an increase of 0.2 percentage points over the previous year, and profitability continued to maintain the leading level of world-class operators.
It is expected that competition among operators in mobile services will ease. On August 7, the People's Post and Telegraph pointed out that “basic telecom companies have been suffering from vicious' internal 'competition for a long time, and there is no time to delay stopping 'internal rolling' vicious competition.” As the most representative mobile data traffic business, it is also the business that accounts for the highest share of operator revenue. We believe that future competition can be mitigated under the guidance of this opinion.
Maintaining an A/H “buy” rating: We believe that in the context of the communications industry cycle moving from network construction to network application, operators have a long-term positive logic. Through continuous expansion of the network's application in the industry, operators' innovative business has maintained rapid growth. As capital expenditure enters a downward cycle, increasing cash dividends is a long-term trend.
The net profit forecast for 24-26 was 138.4/145.6/153.1 billion yuan, respectively, corresponding to PE16X/15X/14X for A shares and 10X/10X/9X for H shares. The current stock price corresponds to the 24-year forecast dividend rate of 4.6% for A shares and 7.2% for H shares. Both A/H shares maintain a “buy” rating.
Risk warning: risk of speeding up fee reduction policies, risk of increased competition, risk of 5G applications falling short of expectations, risk of stock price fluctuations.