Core views

The company's mobile and fixed network businesses are growing steadily, and communication service revenue growth is leading the industry. Against the backdrop of pressure on the entire mobile communications industry, the company is actively promoting integrated services such as mobile phones directly connected to satellites, quantum, and AI to drive revenue growth for mobile value-added applications, and the mobile ARPU value remains stable. The company promotes the rapid development of industrial digital business, strengthens digital platform technology research and development and capacity innovation, and empowers customers in more than 10 key industries such as government affairs, industry, education, healthcare, and finance to digitally transform and upgrade.

occurrences

Recently, the company released its three-quarter report for 2024. The company's revenue for the first three quarters of 2024 was 391.968 billion yuan, an increase of 2.9% over the same period last year, including service revenue of 362.886 billion yuan, an increase of 3.8% over the same period last year. Net profit to mother was 29.299 billion yuan, up 8.1% from the same period last year.

Brief review

1. Steady operation, leading the industry in the growth rate of common service revenue.

In the first three quarters of 2024, the company achieved revenue of 391.968 billion yuan, up 2.9% year on year, of which communication service revenue was 362.886 billion yuan, up 3.8% year on year, leading the industry in growth rate; net profit to mother was 29.299 billion yuan, up 8.1% year on year. Looking at a single quarter, 2024Q3 achieved revenue of 125.995 billion yuan, up 2.9% year on year, of which communication service revenue was 116.651 billion yuan, up 2.5% year on year; net profit to mother was 7.487 billion yuan, up 7.8% year on year. Overall, the company's mobile and fixed network business has been rising steadily, and expenses are well controlled. Against the backdrop of macroeconomic pressure, it has maintained steady operations.

The company's expense ratio is well controlled. In the first three quarters of 2024, the company's sales, management, R&D, and finance expense ratios were -0.63pct, -0.24pct, +0.31pct, and -0.02pct, respectively. Cash flow is still under some pressure. Net cash flow from operating activities in the first three quarters of 2024 was 97.412 billion yuan, down -13.79% year on year, and net cash flow from 2024Q3 operating activities was 39.072 billion yuan, down -17.44% year on year.

2. The value of mobile ARPU remains stable, and the value contribution of smart homes continues to increase.

In the first three quarters of 2024, mobile communication service revenue was 156.823 billion yuan, up 3.2% year on year, and the ARPU for mobile users was 45.6 yuan, which remained stable. The company promotes the 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 integrated scenarios, and promotes the continuous improvement of mobile business value.

Revenue from fixed network and smart home services was 95.624 billion yuan, up 2.9% year on year. Among them, smart home revenue increased 17.0% year on year, and the broadband comprehensive ARPU was 47.8 yuan, the same as last year. 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.

The company uses “network+cloud+AI+ application” to meet the digital needs of thousands of industries, promote the rapid development of strategic emerging businesses, and promote the deep integration of digital technology and the real economy. Industrial digitization business revenue was 105.549 billion yuan, up 5.8% year on year.

3. Profit prediction and investment advice.

The company operates steadily and is leading the industry in terms of revenue growth in communications services. Against the backdrop of pressure on the entire mobile communications industry, the company actively promotes integrated services such as direct mobile phone connectivity to satellites, quantum, and AI, driving revenue growth for mobile value-added applications, and the value of mobile ARPU remains stable. The company promotes the rapid development of industrial digital business, strengthens digital platform technology research and development and capacity innovation, and empowers customers in more than 10 key industries such as government affairs, industry, education, healthcare, and finance to digitally transform and upgrade. The quality of the company's development is improving steadily. We expect the company's net profit to be 32.953 billion yuan, 34.954 billion yuan, and 36.412 billion yuan in 2024-2026, corresponding PE is 17.9, 16.9, and 16.3X; the corresponding PB is 1.29, 1.24, and 1.19X, maintaining a “buy” rating.

4. Risk warning.

Competition in the individual market has intensified, and efforts to speed up and reduce fees have once again increased; the scale of B-side projects has increased, accounts receivable have increased, repayment of some projects is difficult, and credit impairment has increased; the development of cloud computing falls short of expectations, and cloud computing is the development focus of the three telecom operators. In addition, other state-owned enterprises also have cloud computing, and there may be a risk that competition will intensify; the development of the data factor market is still being explored. There are still major uncertainties, such as data verification and data pricing, where there are still major difficulties, related technology is not mature, and data is stored in the transaction process Risk of disclosure; data involving personal information is sensitive, and data property disputes may occur during transactions.