Description of the event

On August 8, the company released the 2024 semi-annual report. 2024H1 achieved revenue of 546.7 billion yuan, a year-on-year increase of 3.0%; net profit to mother of 80.2 billion yuan, an increase of 5.3% year-on-year.

Incident comments

Performance continues to grow steadily, and H2 revenue growth is expected to increase steadily. With 2024H1, the company achieved revenue of 546.7 billion yuan, a year-on-year increase of 3.0%, and achieved revenue from communications services of 463.6 billion yuan, a year-on-year increase of 2.5%, and achieved net profit of 80.2 billion yuan, an increase of 5.3% over the previous year; in a single 24Q2, the company achieved operating income of 283 billion yuan, an increase of 1.1% year on year, achieved communication service revenue of 244.3 billion yuan, an increase of 0.8% year on year, and achieved net profit of 50.6 billion yuan to mother. The year-on-year increase was 5.2%.

Despite the complex external environment and many difficult challenges, the company's overall performance has achieved steady growth. Looking ahead to the full year of 2024, the company's guidelines will be to achieve a steady increase in revenue growth and good profit growth on the basis of the first half of the year.

Mobile ARPU targets have remained stable, and revenue growth in the government and enterprise market is growing well. 2024H1, the company achieved mobile business revenue of 302.9 billion yuan, down 0.9% year on year, of which mobile ARPU was 51.0 yuan, down 2.7% year on year. The main reasons for the decline were: 1) new customers were mainly medium- and low-value customers; 2) slow traffic growth; 3) mobile internet coding technology upgrades; 4) diversion due to changes in the scenario (such as returning to home WIFI). Looking ahead to the year, the company's target mobile ARPU will remain stable.

The company achieved cable broadband revenue of 63 billion yuan, an increase of 8.4% over the previous year, of which Jiacuan's comprehensive ARPU was 43.4 yuan, an increase of 0.2% over the previous year, and is expected to maintain steady growth throughout the year. The company achieved revenue of 112 billion yuan in the government and enterprise market, an increase of 7.3% over the previous year. Among them, mobile cloud revenue was 50.4 billion yuan, an increase of 19.3% over the previous year. The IaaS+PaaS revenue growth rate ranked first among leading cloud merchants.

The short-term cash flow is affected by the pace of repayments, further clarifying the increase in dividend rates. 2024H1's operating cash flow was 131.4 billion yuan, down 18.2% from the previous year. On the one hand, government and enterprise business repayments have slowed down, but judging from the pace, government and enterprise repayments are also mostly concentrated at the end of the year. On the other hand, the company's external payments to support the development of the industrial chain are progressing rapidly. The company will strengthen project management, customer credit rating management, and process control. By the end of 2024, operating cash flow and free cash flow are expected to improve compared to mid-year. In terms of dividends, the company further clarified that the dividend rate for the full year of 2024 will be further increased compared to 2023.

The intelligent calculation construction exceeded expectations, and the data assets were initially reflected in the statement. As of 2024H1, the company's intelligent computing power (FP16) has reached 19.6 EFLOPS, and the first batch of 13 intelligent computing center nodes have been put into operation, exceeding the annual target ahead of schedule (planned at the beginning of the year to exceed 17 EFLOPS by the end of 24). Furthermore, the “Interim Provisions on Accounting Processing Related to Enterprise Data Resources” issued by the Ministry of Finance will come into effect in 2024. Depending on the target use of the data resources, data resources will be confirmed as intangible assets or inventory. As of 24H1, the company's data resources were disclosed for the first time. As of 24H1, the company's data resources were 29 million yuan, listed under intangible assets.

Investment advice: 24H1's performance has maintained steady growth, mobile business revenue and mobile ARPU have declined, Jiakuan's revenue and comprehensive ARPU have grown steadily, and mobile cloud is growing rapidly. The short-term cash flow is affected by the pace of repayments, further clarifying the increase in dividend rates. The company's intelligent computing construction exceeded expectations, and the data assets were initially reflected in the statement. Looking ahead to the whole year, the company's guidance is to achieve a steady increase in revenue growth, good profit growth, stable mobile ARPU, and cash flow is expected to improve compared to mid-year.

The company's net profit for 2024-2026 is estimated to be 139.3 billion yuan, 146.9 billion yuan, and 154.7 billion yuan, corresponding to year-on-year growth rates of 5.7%, 5.4%, and 5.3%, corresponding to 16 times, 15 times, and 14 times PE. It is recommended and maintains a “buy” rating.

Risk warning

1. Traditional business ARPU growth falls short of expectations;

2. Competition in industrial digitalization business intensified.