Incident: The company released its 2024 three-quarter report. The first three quarters achieved revenue of 391.968 billion yuan, an increase of 2.9% year on year, of which service revenue was 362.886 billion yuan, up 3.8% year on year, and net profit to mother was 29.299 billion yuan, up 8.1% year on year. Net profit after deducting non-return to mother was 28.686 billion yuan, up 5.4% year on year; the 24Q3 single quarter achieved revenue of 125.995 billion yuan, up 2.92% year on year, and net profit to mother was 7.487 billion yuan, up 7.76% year on year.

Here are our reviews:

Various businesses continue to grow, and the value contribution of smart homes continues to increase mobile communication services: the company promotes accelerated integration of standard products with new elements of warfare such as cloud, AI, quantum, and satellite, and accelerates platform content filling and intelligent upgrading around integration scenarios, and promotes the continuous increase in mobile business value. In the first three quarters of 2024, mobile communication service revenue reached 156.823 billion yuan, up 3.2% year on year, with a net increase of 14.9 million mobile users, reaching 0.423 billion users, and a net increase of 26.4 million 5G package users, reaching 0.345 billion. The penetration rate reached 81.6%, and the ARPU of mobile users was 45.6 yuan, which remained stable.

Fixed network and smart home services: The company accelerates FTTR upgrades and gigabit application expansion, continuously upgrades smart applications and services for the whole house, strengthens AI upgrades, integration and mutual promotion of platforms such as smart homes, smart communities, and digital villages, and creates a community/rural lifestyle and service circle. In the first three quarters of 2024, the company's fixed network and smart home service revenue reached 95.624 billion yuan, up 2.9% year on year, cable broadband users reached 0.196 billion households, smart home revenue increased 17.0% year on year, broadband comprehensive ARPU was 47.8 yuan, and smart home value contribution continued to increase.

Industrial digitalization: The company seizes the opportunities of economic and social digital transformation, continues to cultivate key industries, continuously expand ecological cooperation, meet the digital needs of thousands of industries with “network+cloud+AI+ application”, promote the rapid development of strategic emerging businesses, and promote the deep integration of digital technology and the real economy. In the first three quarters of 2024, the company's industrial digitization business revenue reached 105.549 billion yuan, an increase of 5.8% over the previous year.

Here are the costs and various expenses:

Operating costs for the first three quarters were 274.413 billion yuan, up 3.0% year on year. The main reason was that the company seized strategic opportunities for rapid development of the digital economy, increased investment in key areas such as technological innovation and industrial digitization, strengthened intelligent operation to reduce costs and increase efficiency, and continuously improve resource efficiency; sales expenses were 39.435 billion yuan, down 3.2% year on year; management expenses were 26.884 billion yuan, down 0.6% year on year; R&D expenses were 8.75 billion yuan, up 19.3% year on year, mainly due to the company In order for the company to focus on strategic emerging industries and future industries, continue to step up scientific and technological innovation efforts, strengthen research on key core technologies, and enhance core capabilities; financial expenses were 0.518 billion yuan, down 12.2% year on year, mainly due to a decrease in interest expenses on leasing liabilities.

Attach great importance to shareholder returns and continue to increase dividends

The company attaches great importance to shareholder returns and strives to enhance its ability to generate profits and cash flow. Starting in 2024, the profit distributed by the company in cash will gradually increase to more than 75% of the profit due to shareholders within three years, continuing to create greater value for shareholders.

Profit forecasting and investment suggestions: The company insists on being customer-centered, accelerating the integration of new elements such as cloud, AI, quantum, and satellite into standard products, continuously improving product capabilities, business value and service levels, speeding up platform content filling and intelligent upgrading around the CHBG integration scenario, expanding the scale of digital platform business and infrastructure connections, promoting service-oriented enterprise construction in all aspects, and optimistic about the company's future development. The company's net profit for 24-26 is estimated to be 33.06/35.55/37.77 billion yuan, maintaining an “increase in holdings” rating.

Risk warning: industry competition intensifies, innovative business progress falls short of expectations, cost growth exceeds expectations, etc.