Key points of investment:

Shareholders plan to increase their holdings of the company's shares by a total of 0.3-0.5 billion yuan

The company issued an announcement. CLP Hikang Group, the controlling shareholder of the company, and its co-actor Telecom Investment, are based on confidence in the company's future stable development and recognition of long-term investment value. In order to enhance investor confidence, they plan to increase their A-share holdings through centralized bidding transactions within 6 months from the date of the announcement. Among them: CLP Hikang Group plans to increase its holdings by 0.2-0.3 billion yuan, and Telecom Investment plans to increase its holdings by 0.1-0.2 billion yuan. The holdings increase plan does not set a fixed price range; the entity that increases holdings will take the opportunity to implement the plan to increase their holdings based on a reasonable judgment on the value of the company's shares.

The chairman proposed to repurchase the company's shares for 2-2.5 billion yuan

The company issued an announcement. Mr. Hu Yangzhong, the chairman of the company, proposed that the company repurchase the company's shares through centralized bidding transactions. The proposed repurchase amount is 2-2.5 billion yuan, and the repurchase price should not exceed 40 yuan/share, corresponding to the repurchase ratio of 0.54%-0.68%. The repurchase implementation period is no more than 12 months from the date the company's shareholders' meeting deliberates and approves the share repurchase plan, and that all of the shares repurchased be cancelled and the company's registered capital reduced.

Strong confidence in the company's future development prospects

We believe that the simultaneous announcement of the company's buyback and shareholder increase shows that the company's management and shareholders are highly appreciative of the company's business development prospects, long-term profitability and investment value, which is conducive to further enhancing investor confidence.

In line with local government debt support expectations recently announced by the Ministry of Finance, considering the easing of financial pressure after local government debt conversion, it is expected that fixed asset investment will increase, thereby boosting the company's G-side revenue and helping the company achieve a steady improvement in revenue and operating quality.

Profit forecasting and valuation analysis

We maintain our previous profit forecast and forecast that the company's 2024-2026 revenue will be 97.475, 109.484, 123.809 billion yuan, and net profit attributable to mother of 14.751, 18.035, and 22.26 billion yuan. Referring to the closing price of October 18, 2024, the corresponding PE is 18, 15, 12 times. Maintain a “buy” rating.

Risk warning

The macroeconomic growth rate fell short of expectations; the implementation of the company's artificial intelligence, big data and other technology applications fell short of expectations; as the company's layout for the intelligent IoT market intensified, the market competition it faced intensified; European and US sanctions intensified, causing the company's overseas business growth to fall short of expectations.