Incident: On the evening of August 20, 2024, the company released its 2024 semi-annual report. The first half of 2024 achieved revenue of 266 billion yuan (YoY +2.8%), including service revenue of 246.2 billion yuan (YoY +4.3%), net profit to mother of 21.8 billion yuan (YoY +8.2%), and a dividend ratio of 70%.

Capital expenditure for the first half of the year was $47.2 billion (YoY +13.5%), accounting for about 49.2% of the guidance at the beginning of the year.

Mobile communications service revenue bucked the trend, and Tianyi Cloud continued to grow at a high rate. 2024H1 revenue was 266 billion yuan (YoY +2.8%), of which service revenue was 246.2 billion yuan (YoY +4.3%), which was higher than the industry growth rate. Mobile communication service revenue was 105.2 billion yuan (YoY +3.6%), value-added and application revenue was 18.1 billion yuan (YoY +17.1%), 5G network user penetration rate increased by 14.3 pcts year over year, and mobile user ARPU rose to 46.3 yuan (46.2 yuan in the same period last year); fixed network smart home business revenue was 64 billion yuan (YoY +3.2%), and broadband comprehensive ARPU rose to 48.3 yuan (48.2 yuan in the same period last year); industrial digitalization continued to develop rapidly. 24H1's revenue was 73.7 billion yuan (YoY +7.2%), of which Tianyi Cloud revenue was 55.2 billion yuan (YoY +20.4%).

Continuously promote the evolution and upgrading of digital information infrastructure, and capital expenditure is skewed towards computing power. The company built a computing power infrastructure integrating cloud intelligence and training, and built a leading domestic fully liquid-cooled 10,000 card pool in the Beijing-Tianjin-Hebei and Yangtze River Delta, carrying large model training tasks with trillion parameters to meet the needs of various AI applications and reasoning, adding 10 EFLOPS to 21 EFLOPS of intelligent computing power. The company completed a cumulative capital expenditure of 47.2 billion yuan in the first half of the year, accounting for about 49.2% of the capital expenditure guidelines at the beginning of the year. Among them, the industrial digitization investment was 16.1 billion yuan, accounting for 34% of the total capital expenditure in the first half of the year.

Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 33/35.5/38.1 billion yuan, and the corresponding EPS is 0.36, 0.39, and 0.42 yuan/share, respectively. We maintain the reasonable value of the previous report, that is, a fair value of 7.34 yuan per share and a reasonable value of HK$4.98 per share for H shares, and maintain China Telecom's “buy” ratings for A shares and H shares.

Risk warning: 5G penetration rate falls short of expectations; cloud business growth falls short of expectations; 5G co-construction and sharing falls short of expectations; industry competition intensifies.