Incidents. 2024H1 achieved operating income of 197.3 billion yuan, an increase of 2.9% year on year; net profit to mother of 6.04 billion yuan, an increase of 10.9% year on year. 2024Q2 achieved 97.85 billion yuan, a year-on-year increase of 3.42%; net profit to mother was 3.59 billion yuan, an increase of 13.0% year-on-year.

The target of double-digit profit growth was achieved in the medium term, and network revenue grew steadily. 2024H1's network communication business reached 125.1 billion yuan, an increase of 2.1% year on year, and the computing network digital intelligence business reached 43.5 billion yuan, an increase of 6.6% year on year. The total number of connected users of 2024H1 reached 1.07 billion, of which mobile users were 0.339 billion, up 3.5% year on year, 5G users reached 0.28 billion, up 18.7% year on year, 5G user penetration rate exceeded 80%, and integrated user ARPU reached 103 yuan. Over the same period, broadband users reached 0.117 billion, and the gigabit broadband penetration rate was 25%. In the digital intelligence business, Unicom Cloud achieved revenue of 31.7 billion yuan, an increase of 24.3%; data centers achieved revenue of 13.1 billion yuan, an increase of 5.0% year on year; data services achieved revenue of 3.2 billion yuan, an increase of 8.6% year on year; and digital intelligence applications achieved revenue of 3.7 billion yuan, an increase of 13.5% year on year. The company's annual business goals remain steady revenue growth, double-digit profit growth, and the company's bid performance to achieve the mid-term target.

Capital expenditure declined, and the 24H1 dividend ratio exceeded expectations. 2024H1's capital expenditure was 23.9 billion yuan, -13.4% year-on-year, and the annual Capex spending target remained at 65 billion yuan. The company announced an interim dividend of 0.2481 yuan (tax included) per share, an increase of 22.2% over the previous year, and an interim dividend payout rate of 55%. The dividend payout rate for the whole year is expected to reach a record high. The company's interest-bearing debt was 3.05 billion yuan, down 3.8% year on year, operating cost ratio decreased by 0.6% pp, management expenses decreased by 3.4% year on year, and the results of improving the company's quality and efficiency were remarkable.

Under the guidance of the three major innovations, we will continue to develop the integration of networked computing networks. The company will continue to lay out network innovation, technological innovation, and service innovation. On the basis of network and technological innovation, the company will promote service innovation, accelerate the layout of marketing outlets at the network communication business level, and expand the digital intelligence of computing networks. In the field of networked communications, 5G intermediate frequency base stations reached 1.31 million stations, low frequency base stations reached 0.78 million stations, and 4G intermediate frequency base stations exceeded 2 million stations in the first half of the year, and network capabilities continued to increase; over 100 cities achieved commercial deployment of 5G-A key technologies such as REDCap and carrier aggregation. The second is to speed up the construction of a high-speed broadband Internet. Promote the popularization and quality of gigabit networks, with 10GPON ports accounting for 79%, leading the industry; launch 50GPON technology pilot projects to help build 10GPON cities. In the field of computing network digital intelligence, the company will improve the integrated layout of the cloud network, build Wanka intelligent computing centers such as Lingang and Hohhot in Shanghai, and reach 10EFLOPS of intelligent computing power; lay out more than 20 large-scale computing power center parks to fully cover the “East Digital and Western Computing” hub nodes. Accelerate the construction of a “new eight vertical and eight horizontal” national backbone network, deploy ultra-high-speed interconnection channels between computing power centers, and build a high-throughput, high-performance, and highly intelligent computing power intelligent network.

Investment advice: We expect the company's net profit to be 9.299/10.489/11.738 billion yuan in 2024/2025/2026, up 13.8%/12.8%/11.9% year-on-year, corresponding to PE 16/14/13 times, maintaining the “recommended” rating.

Risk warning: The growth rate of mobile users falls short of expectations, and operating cash liquidity continues to decline.