Description of the event

On October 21, the company released the 2024 three-quarter report. 2024Q1-Q3 achieved revenue of 791.5 billion yuan, a year-on-year increase of 2.0%; net profit to mother was 110.9 billion yuan, an increase of 5.1% year-on-year.

Incident comments

Performance continued to grow steadily, and Q3 revenue performance was mainly affected by non-main businesses. With 2024Q1-Q3, the company achieved revenue of 791.5 billion yuan, an increase of 2.0% over the previous year, of which communication service revenue was 678 billion yuan, an increase of 2.0% year on year, and realized net profit to mother of 110.9 billion yuan, an increase of 5.1% year on year. Looking at a single quarter, 24Q3 achieved revenue of 244.7 billion yuan, a year-on-year decrease of 0.1%. Among them, communication service revenue was 214.5 billion yuan, up 1.0% year on year, and realized net profit to mother of 30.7 billion yuan, an increase of 4.6% year on year. Overall, the 24Q3 company's performance continued to grow steadily. The revenue side was mainly affected by other business revenue (down 7.0% year on year). The growth rate of communications service revenue was basically in line with industry data disclosed by the Ministry of Industry and Information Technology. The growth rate of the company's communications service revenue rebounded slightly compared to 24Q2 (+0.8% year over year), and business development progressed steadily.

According to the estimate, the decline in mobile ARPU stabilized in Q3, and the growth of Jiakuan's comprehensive ARPU accelerated. 2024Q1-Q3, the company's mobile ARPU was 49.5 yuan, down 3.3% year on year. Apparently, the decline was larger than 24H1, but we estimate that the 24Q3 mobile ARPU decline has basically stabilized; the company's comprehensive ARPU for household customers was 43.2 yuan, up 2.6% year on year, and growth accelerated (24H1 growth rate was 0.2%). Looking ahead to the whole year, the company will continue to cultivate large-scale value management and strive to achieve the goals of stable mobile ARPU and steady growth in comprehensive ARPU for home customers.

Government enterprises & emerging markets have maintained good growth, which is the core new driving force. Government and enterprise market: The company integrates 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 has maintained good growth. Emerging markets:

The company deepens “content+technology+integration and innovation” operations, builds competitive advantages in the content media business, leverages the domestic and international market linkage effects, and vigorously expands international business. The company's content media revenue and international business revenue have maintained rapid growth.

Cash flow improved markedly in Q3, and accounts receivable are expected to improve significantly in Q4. In 24Q3, the company's net operating cash flow was 92.7 billion yuan, up 20.15% year on year, a significant improvement over the previous two quarters. The company will continue to strengthen project management, customer credit rating management, and process control. It is expected that operating cash flow and free cash flow will continue to improve by the end of '24. By the end of 24Q3, the size of the company's accounts receivable had increased to 90.2 billion yuan. Judging from reports for the past 3 years, there was no significant decrease in the size of Q3 accounts receivable compared to Q2. Q4 may be the core centralized collection period, and the scale of accounts receivable is expected to drop significantly by the end of '24.

Investment advice: The 24Q3 company's performance continued to grow steadily. The revenue side was mainly affected by other business revenue. The growth rate of communications service revenue was basically in line with industry data disclosed by the Ministry of Industry and Information Technology, and the growth rate of the company's communications service revenue rebounded slightly from 24Q2. In terms of ARPU, it is estimated that the decline in mobile ARPU stabilized in Q3, and that Jiakuan's comprehensive ARPU growth accelerated. Furthermore, the 24Q3 company's cash flow improved markedly; although the size of accounts receivable increased, it was in line with the previous pace. Looking ahead to the full year, the company's guidance is to achieve a steady increase in revenue growth and good profit growth. Cash flow and accounts receivable are expected to improve by the end of the year. The company's net profit for 2024-2026 is estimated to be 138.7 billion yuan, 145.8 billion yuan, and 153.1 billion yuan, corresponding to year-on-year growth rates of 5.2%, 5.1%, and 5.0%, corresponding to PE 16 times, 15 times, and 15 times. 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.