Incident: The company released its 2024 semi-annual report. 24H1 revenue was 546.7 billion yuan, up 3.0% year on year, including communication service revenue of 463.6 billion yuan, up 2.5% year on year; net profit to mother was 80.2 billion yuan, up 5.3% year on year, basic earnings per share were 3.75 yuan; EBITDA was 182.3 billion yuan, and EBITDA accounted for 39.3% of communications service revenue; annual return on net assets of 12%, up 0.2 percent year on year Point, profitability continues to be at the leading level of world-class operators.
Continuous high-quality development, remarkable results in the transformation of digital intelligence
In terms of business structure, HBN's revenue in CHBN reached 45.0% of communications service revenue, up 2.3 percentage points year on year; “second curve” digital transformation revenue reached 147.1 billion yuan, up 11.0% year on year, accounting for 31.7% of communications service revenue, up 2.4 percentage points year on year.
Individual market: 24H1's revenue was 255.2 billion yuan, down 1.6% year on year; mobile customers surpassed 1 billion, with a net increase of 9.26 million, of which 5G network customers reached 0.514 billion, a net increase of 0.049 billion, with a penetration rate of 51.4%; mobile ARPU maintained industry leadership at 51.0 yuan (-2.67% year over year). Reasons for the decline in ARPU: 1) The traditional model that relies on scale to drive growth is now slightly underpowered. Currently, the mobile phone penetration rate has reached 125 units/100 people, and the new customers are mainly medium- to low-value customers, while the second card slot introduced for the campus market and specific scenarios has further diluted ARPU values; 2) the trend of traffic growth is slowing down. Future stabilization ARPU initiatives: Propose three plans, including the “two new” upgrade plans, the “AI+” action plan, and the “BASIC6” science and technology innovation plan; provide information-based services to operate, moving from commonality to individuality, and from pursuing price to pursuing value.
Household market: 24H1 revenue of 69.8 billion yuan, up 7.5% year on year; household broadband customers reached 0.272 billion, a net increase of 8.48 million households, leading the scale industry. The penetration rate of gigabit home broadband customers was 33.5%, up 3.5 percentage points from the end of 23; the comprehensive ARPU of household customers reached 43.4 yuan, up 0.2% year on year.
Government and enterprise market: 24H1 revenue 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; the share of winning bids in the public tender market reached 18.4%, leading the industry; mobile cloud revenue reached 50.4 billion yuan, up 19.3% year on year, of which IaaS+PaaS revenue share remained in the top five in the industry; 5G vertical industry applications remained leading; accelerate the low-altitude economy, aviation internet, and space-earth integrated business planning and capacity layout. Actively explore new business opportunities.
Emerging markets: 24H1 revenue of 26.6 billion yuan, a year-on-year increase of 13.2%; insist on growing on a large scale, improving efficiency, and strengthening the brand. Its international business revenue was 11.8 billion yuan, up 16.3% year on year, and digital content revenue was 14.5 billion yuan, up 11.3% year over year.
Digital transformation business: 24H1 personal digital revenue increased 34.6% year on year; household digital revenue increased 4.5% year on year; government and enterprise digital revenue increased 7.9% year on year, of which DICT revenue reached 65.2 billion yuan, up 8.4% year on year; digital revenue in emerging markets increased 9.7% year on year.
The “two new models” are advancing at an accelerated pace, and the goals for the whole year show confidence
The company accelerated the “two new” upgrades, completed a capital expenditure of 64 billion yuan (5G network investment of 31.4 billion yuan) in the first half of the year, and continued improvement of the new information infrastructure. “Dual Gigabit” remains in the lead. More than 2.29 million 5G base stations have been opened, and 5G-A commercial deployment has now been promoted in over 280 cities, and the gigabit broadband coverage has reached 0.438 billion households. Continuing to lead the computing network layout, the general computing power scale reached 8.2 EFLOPS, and the intelligent computing power scale reached 19.6 EFLOPS. The company will continue to strengthen precise investment and fine management, and the annual capital expenditure will be kept within 173 billion yuan as indicated at the beginning of the year, reducing the revenue ratio to less than 20%. The scale of connections reached a new high. The total number of connections exceeded 3.5 billion, a net increase of 0.15 billion. Mobile customers hit the billion mark.
Annual goal: Strive to achieve a steady increase in revenue growth and good profit growth on the basis of the first half of the year. The net increase in 5G network users was 0.08 billion; mobile ARPU remained stable; the net increase in household broadband customers was 18 million, and the comprehensive household ARPU grew steadily; the net increase in government and enterprise customers was 4 million, and government and enterprise revenue grew well; and revenue in emerging markets grew rapidly.
Technological innovation momentum continues to increase, and emphasis is placed on shareholder returns
The company comprehensively promoted the “BASIC6” science and innovation program, and innovative achievements continued to emerge: the 5G-A standard ranked first among global operators; successfully built a “four computing in one” computing network brain; launched the Yangtze River Delta hub Wuhu Cluster Computing Power Public Service Platform for the first time at a national hub node; released the “nine days” 100 billion parameter multi-modal model, and was the first among central enterprises to pass the national “double filing”. The company seized the opportunity and achieved a breakthrough in the “AI+” campaign: it released a “nine day” artificial intelligence platform composed of a 10,000 card intelligent computing cluster, a large model with more than 100 billion modals, and a major 100 factor ecosystem platform.
A total of 450 AI capabilities have been established, and nearly 1000 industrial applications have been empowered.
The company attaches importance to shareholder returns and decided that the mid-2024 dividend was HK$2.60 per share, an increase of 7.0% over the previous year. The proportion of profit distributed in cash for the full year 2024 to the profit attributable to shareholders for the year was further increased compared to 2023.
Profit forecasting and investment suggestions: The company's C-side business is stable, smart homes are being effectively expanded, and government and enterprise services, especially cloud business, continue to grow rapidly, driving steady growth in the company's overall revenue. At the same time, capital expenditure is declining year by year, costs and expenses are controllable, competitive advantage is stable, cash flow is sufficient, dividends are guaranteed, and continuous dividends can be expected. It is the preferred variety for high dividends. Considering the increase in adverse effects brought about by changes in the current external environment, effective demand is still insufficient, the old and new momentum is in the transition period, and the company is facing some uncertainties. The net profit to mother for 24-26 is estimated to be 139/145.5/152.1 billion yuan (original value was 142.6/153.1/164.3 billion yuan), maintaining a “buy” rating.
Risk warning: industry competition exceeds expectations, cost investment exceeds expectations, new business progress is slower than expected, etc.