Incident: The company released its 2024 three-quarter report. The first three quarters of 2024 achieved revenue of 791.5 billion yuan, up 2.0% year on year, including main business revenue of 678 billion yuan, up 2.0% year on year, net profit to mother of 110.9 billion yuan, up 5.1% year on year; 24Q3 achieved revenue of 244.7 billion yuan in a single quarter, down 0.1% year on year, of which main business revenue was 214.5 billion yuan, up 1.0% year on year, net profit to mother 30.7 billion yuan, up 4.6% year over year.

Looking at each business:

Personal market: Adhere to the integration and expansion of “connection+application+equity”, take good care of integrated customer operations, strengthen market segment expansion, deepen traffic operations, and consolidate the foundation of the individual market. At the end of September '24, the company's mobile customers reached 1.004 billion, of which 5G network customers reached 0.539 billion; in the first three quarters, mobile Internet traffic increased 2.1% year on year, mobile Internet DOU reached 15.7GB; mobile ARPU was 49.5 yuan (down 1.7 yuan year on year, a decrease of 3.3%).

Family market: Actively build a “full gigabit+ cloud life” smart home ecosystem, and actively create new growth points such as FTTR and HDICT, with the “Mobile Love Family” brand as the lead. By the end of September '24, the company's cable broadband customers reached 0.314 billion, with a net increase of 15.36 million in the first three quarters, including 0.276 billion household broadband customers, a net increase of 12.46 million in the first three quarters; the comprehensive ARPU for household customers in the first three quarters was 43.2 yuan (up 1.1 yuan year on year, an increase of 2.6%).

Government and enterprise market: Integrate to promote “network+cloud+DICT” scale expansion, accelerate the expansion of key areas such as the merchant market, continue to deepen industry customer operations, strengthen solution integration capabilities, improve project delivery management, and promote equal emphasis on quantity and quality. The company's DICT business revenue continued to grow well in the first three quarters.

Emerging markets: Deepen “content+technology+integrated innovation” operations, build competitive advantages in content media business, give full play to domestic and international market linkage effects, and vigorously expand international business. The company's content media revenue and international business revenue all maintained rapid growth in the first three quarters.

The annual capital expenditure ratio is expected to fall below 20%. Shareholder companies continue to increase dividend returns and accelerate the “two new” upgrades. Capital expenditure of 64 billion yuan was completed in the first half of the year, and the new information infrastructure was continuously improved. 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%. Previously, the board of directors of the company proposed a dividend payout rate of 71% for the full year of 2023. In order to better give back to shareholders and share development results, the company fully takes into account profitability, cash flow conditions and future development needs. Starting in 2024, profits distributed in cash will gradually increase to more than 75% of the profits that shareholders should account for that year, and strive to create greater value for shareholders.

Profit forecasting and investment suggestions: The company's C-side business is stable, smart homes are being effectively expanded, cloud business continues to grow rapidly in government and enterprise affairs, and its competitive advantage continues to stabilize. We are optimistic about the company's long-term development. Considering that individual ARPU is under pressure, the net profit due to mother for 24-26 was adjusted to 138.5/145.3/152 billion yuan (original value was 139/145.5/152.1 billion yuan) to maintain the “buy” rating.

Risk warning: industry competition exceeds expectations, cost investment exceeds expectations, new business progress is slower than expected, etc.