Incidents. On October 22, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 90.045 billion yuan, an increase of 0.73% year on year; achieved net profit of 7.906 billion yuan, up 0.83% year on year; realized net profit of 6.898 billion yuan after deduction, a year-on-year decrease of 2.86%.

Adhere to the main channel of intelligent computing strategy and grasp the pace of industrial development. The company is precise, pragmatic, and steady. In the first three quarters of 2024, the company achieved revenue of 90.045 billion yuan, an increase of 0.73% year on year; achieved net profit of 7.906 billion yuan, an increase of 0.83% year on year; achieved net profit of 6.898 billion yuan after deduction, a year-on-year decrease of 2.86%. In the first three quarters, domestic operators' network business was pressured by the impact of the market environment. The international market continued to break through the big country's T and maintain double-digit growth. Looking at the Q3 quarter of 2024, the company's revenue and profit performance showed a downward trend. In the Q3 single quarter, the company achieved revenue of 27.554 billion yuan, a year-on-year decrease of 3.94% and a decrease of 13.64% month-on-month; realized net profit of 2.174 billion yuan, a year-on-year decrease of 8.23% and a year-on-month decrease of 27.33%. In the first three quarters, the company incurred R&D expenses of 18.641 billion yuan, accounting for 20.7% of revenue. The company maintained stable R&D investment over a long period of time, promoted technological innovations such as 5G-A, all-optical networking, and full-stack intelligent computing, and accelerated deep integration and application implementation with hundreds of industries.

Continuously deepen intelligent computing power, and continue to innovate technologies in various fields. The company continues to deepen in the fields of connectivity, computing power, and terminals. Focusing on the commercial deployment and implementation of 5G-A, the company and operators are jointly building a “space-space integrated” 5G-A global three-dimensional network to promote the new development of satellite Internet. In the field of low-altitude economy, joint partners have verified the application of 5G-A sensing integration in various scenarios such as logistics distribution and low-altitude safety in more than 80 pilots in 25 provinces and cities, including Beijing, Nanjing, and Shenzhen. In addition, the company launched an 800G OTN pluggable solution to achieve a transmission distance of 2,000 km, and released a new generation of intelligent optical access products based on 50G PON technology to provide users with a 10 gigabit access experience and help the industry enter the 10 gigabit optical network era. The company insists on using intelligent computing as the main channel for long-term strategy, providing full-stack intelligent computing solutions, launching a “one-machine, multi-chip” open architecture AI server, compatible with mainstream GPUs, and using network coercion to launch 2*200G network cards based on self-developed chips; promoted OLink high-speed bus interconnection standards, and developed its own high-capacity switching chips. In the future, as the digital intelligence process accelerates, the company will continue to maintain its leading edge in the industry to help the company develop in the long-term 1.

Profit forecasting and investment ratings. We predict that the company's net profit for 2024-2026 will be 9.655/10.787/12.004 billion yuan, and the current stock price is 15/13/12 times PE, respectively. As a leader in the domestic ICT industry, we are continuously accelerating the expansion from connectivity to computing power, focusing on the rapid development of Daguo Big Network's Big T strategy. The company's performance may maintain steady development and maintain a “buy” rating.

Risk warning: risk of new product development falling short of expectations; risk of international political and trade conflict; risk of increased competition; risk of intellectual property disputes.