Incident: The company released its report for the third quarter of 2024 on October 22. In the first three quarters of 2024, the company achieved operating income of 290.12 billion yuan, a year-on-year increase of 2.99%, a total profit of 23.418 billion yuan, a year-on-year increase of 10.01%, and a net profit of 8.338 billion yuan to mother, an increase of 10.04% year-on-year, maintaining a double-digit growth rate and steady improvement in performance. The company achieved EPS (basic) of 0.27 yuan.

Revenue and performance increased steadily. In the first three quarters of 2024, the company achieved operating income of 290.123 billion yuan, a year-on-year increase of 2.99%, achieved a total profit of 23.418 billion yuan, a year-on-year increase of 10.01%, achieved net profit to mother of 8.338 billion yuan, an increase of 10.04% over the previous year, maintained a double-digit growth rate, and steadily improved performance. Q3 2024 revenue was 92.782 billion yuan, up 3.25% year on year, and net profit to mother was 2.299 billion yuan, up 7.75% year on year. The company's operating revenue has grown steadily, the profit level has increased rapidly, the number of users has been steadily expanding, and the network infrastructure continues to be consolidated to achieve the coordinated development of the two main businesses of networked communications and networked digital intelligence.

Stabilize and improve the quality of networked communication services. The number of mobile users reached 0.345 billion, with a cumulative net increase of 11.23 million users throughout the year, a record high for the same period in the past 6 years; of these, 0.286 billion 5G package users, the 5G package penetration rate reached 83%, and the user structure continued to be optimized. The number of IoT connections reached 0.594 billion, a net increase of nearly 100 million; fixed-line broadband users reached 0.121 billion, with a cumulative net increase of 7.12 million users throughout the year, and the number of users continued to grow well.

Improve the quality and efficiency of computing and digital intelligence services. The computing power business grew rapidly, with Unicom's cloud revenue reaching 43.86 billion yuan, up 19.5% year on year; driving AIDC's accelerated development with data center adaptation and data center revenue reaching 19.69 billion yuan, up 6.8% year on year; actively helping new industrialization and boosting Unicom's 5G+ industrial Internet brand influence. The total number of 5G industry virtual private network service customers reached 14013; actively built a “big security” system from safe operation to secure services and ecological prosperity, and Internet communication security revenue maintained a strong growth trend.

Accelerate the construction of new digital infrastructure. Continuously improve the level of mobile Internet coverage, and joint construction and sharing have been deepened. 5G intermediate frequency base stations have reached 1.36 million stations, and 4G medium frequency shared base stations have reached more than 2 million stations; continue to promote the popularization and upgrading of gigabit networks, with 10GPON ports accounting for 80%, leading the industry; build a high-throughput, high-performance, and highly intelligent China Unicom computing power intelligent network AInet for mass data transmission needs, and build Wanka intelligent computing centers such as Lingang and Hohhot in Shanghai. The large-scale computing power center park fully covers the “East and West Computing” hub nodes.

Investment proposal: The company focuses on the main responsibilities of a cyber power and digital China, thoroughly implements the strategy of a strong science and technology enterprise, accelerates the construction of new digital infrastructure, and promotes the coordinated development of the two main businesses of networked communications and networked digital intelligence. We maintain our profit forecast. In 2024/25/26, the company is expected to achieve operating income of 385.96/398.431/409.879 billion yuan, up 3.6%/3.2%/2.9% year on year; net profit to mother of 9.078/10.01/10.84 billion yuan, up 11.1%/10.3% year on year. Maintain a “Highly Recommended” investment rating.

Risk warning: industry regulatory policy risks, market competition exacerbates risks, and cost control falls short of expectations