Core views

The company's overall operations have remained steady, and profits have maintained good growth. In terms of the individual market, against the backdrop of slowing traffic growth, the company is strengthening the integrated operation of applications, rights, and terminals to maintain a stable individual market; in the household market, while promoting the continuous penetration of gigabit broadband, it strengthens the “smart home+ content” drive to enhance the comprehensive ARPU of the home market; in the government and enterprise market, it continues to cultivate the industry, accumulate core capabilities, and improve the profitability of B-side projects. Based on the 71% dividend ratio, the company's current dividend ratio is still 7% for H shares and 4.5% for A shares. The dividend return is still attractive.

occurrences

Recently, the company released its three-quarter report for 2024. In the first three quarters of 2024, the company's revenue was 791.5 billion yuan, up 2.0% year on year; among them, main business revenue was 678 billion yuan, up 2.0% year on year; other business revenue was RMB 113.4 billion, up 2.2% year on year; net profit to mother was 110.9 billion yuan, up 5.1% year on year, net profit margin was 14.0%; EBITDA was 263.1 billion yuan, same The ratio decreased by 2.0%; EBITDA accounted for 38.8% of the main business revenue.

Brief review

1. Profits maintained good growth, and EBITDA declined slightly.

The company achieved operating income of 791.5 billion yuan in the first three quarters of 2024, an increase of 2% over the previous year, including revenue from communications services of 678 billion yuan, an increase of 2% over the previous year; net profit to mother was 110.9 billion yuan, an increase of 5.1% over the previous year. Looking at a single quarter, 2024Q3 achieved revenue of 244.7 billion yuan, a year-on-year decrease of 0.1%. Among them, revenue from communications services was 214.5 billion yuan, an increase of 1% year-on-year; net profit to mother was 30.7 billion yuan, an increase of 4.6% over the previous year. EBITDA was 263.1 billion yuan, down 2.0% year on year; EBITDA accounted for 38.8% of main business revenue. Affected by the macroeconomy, the growth rate of the company's personal and government business revenue has slowed, but the company's 2024Q3 consolidated revenue growth rate improved month-on-month.

2. Individual ARPU is under pressure in the short term, and the DICT business is growing well.

In the first three quarters of 2024, the company's mobile ARPU value was 49.5 yuan, down 1.7 yuan from the same period last year; the DOU was 15.7 GB, up 0.1 GB from the same period last year. In the context of consumption downgrade, some users with high ARPU values chose cheaper packages and faced some pressure to downgrade their packages.

In the household market, we are actively building a “full gigabit+ cloud lifestyle” smart home ecosystem and creating new growth points such as FTTR and HDICT. The company's comprehensive ARPU was 43.2 yuan, an increase of 1.1 yuan over the same period last year.

In terms of government and enterprise affairs, the company is integrating to promote “network+cloud+DICT” scale expansion, accelerate the expansion of key areas such as the merchant market, and maintain good growth in the DICT business. Furthermore, most of the company's accounts receivable come from the government, and subsequent government debt companies may benefit.

3. 2024Q3 net operating cash flow rebounded, and dividend returns are still impressive.

The company's net operating cash flow for the first three quarters of 2024 was 224.075 billion yuan, down 5.72% year on year, but in 2024 Q3, the company's net operating cash flow was 92.698 billion yuan, up 20.15% year on year. Good cash flow guarantees the company's ability to pay dividends. Based on a payout ratio of 71%, the company's current dividend ratio is still 7% for H shares and about 4.5% for A shares, and dividend returns are still attractive.

4. Profit prediction and investment advice.

The company's overall operation remains steady. In terms of the individual market, against the backdrop of slowing traffic growth, the company is strengthening the integrated operation of applications, rights, and terminals to maintain a stable individual market; in the household market, while promoting the continuous penetration of gigabit broadband, it strengthens the “smart home+ content” drive to enhance the comprehensive ARPU of the home market; in the government and enterprise market, it continues to cultivate the industry, accumulate core capabilities, and raise the profit level of B-side projects. We expect the company's net profit to be 138.2 billion yuan, 143.1 billion yuan, and 146.4 billion yuan in 2024-2026, corresponding PE is 15.8X, 15.3X, 14.9X, and PB is 1.6X, 1.6X, 1.5X.

Based on a payout ratio of 71%, the company's current dividend ratio is still 7% for H shares and 4.5% for A shares. The dividend return is still attractive, maintaining a “buy” rating.

5. Risk warning.

Competition in the individual market intensified, and efforts to speed up and reduce fees increased again. 5G-related applications were scarce and traffic growth slowed; AI business development fell short of expectations; cloud computing fell short of expectations. Cloud computing was the development focus of the three telecom operators. In addition, other state-owned enterprises also deployed cloud computing, and there may be a risk that competition will intensify; the development of the data factor market is still being explored, and there are still major difficulties, such as data authorization and data pricing. The relevant technology is immature, and there is a risk of data leakage during the transaction process; data involving personal information is more sensitive and transactions Data property disputes may occur in the process; government and enterprise market revenue growth is under pressure; accounts receivable increase, impairment increases, free cash flow deteriorates, etc.