Key points of investment:
Event: On August 16, 2022, the company published its 2022 mid-year report. 2022H1 achieved a total revenue of 240.2 billion yuan, an increase of 10.4% over the previous year, of which service revenue was 221.4 billion yuan, an increase of 8.8% over the previous year, and the net profit of the mother was 183 billion yuan, an increase of 3.1% over the previous year.
The performance was in line with expectations, and the dividend ratio increased. In 2022, the company fully implemented the “cloud transformation to digital transformation” strategy, the overall operation developed steadily, and revenue maintained double-digit growth in the first half of the year. The company attaches great importance to shareholder returns. The board of directors decided to pay an interim dividend for the first time in 2022. The profit distributed in cash was 60% of the profit due to the company's shareholders in the first half of 2022, fulfilling the promise to increase medium-term dividends when issuing A shares.
5G users continue to convert, and the value of mobile ARPU is steadily increasing. In terms of personal mobile business, the company continuously optimizes the user experience by improving 5G coverage and network quality, and enriching 5G applications, driving a continuous increase in the scale and value of mobile users. 2022H1's mobile service revenue reached 99 billion yuan, an increase of 6.0% over the previous year. The number of mobile users reached 384 million, the number of 5G package users reached 232 million, and the ARPU of mobile users was 46 yuan, which continued to grow (the ARPU value for mobile users in 2021 was 45 yuan).
Industrial digitalization accounts for more than 25% of revenue, and Tianyi Cloud's revenue has once again doubled. 2022H1 continues to empower the transformation and upgrading of traditional industries. The revenue from industrial digitization business reached 58.9 billion yuan, an increase of 19.0% over the previous year, and the revenue share reached 26.6%. Looking at segmented projects, 1) The company's Tianyi Cloud revenue doubled again, reaching RMB 28.1 billion, an increase of 100.8% over the previous year, and continued to maintain its leading position in the government public cloud market and exclusive cloud service market. 2) The company accelerated the capacity building of new hubs around the “Eastern and Western Computing” project requirements. 2022H1 IDC's revenue reached 17.9 billion yuan, an increase of 11.1% over the previous year.
The capital expenditure of 2022H1 is clearly skewed towards industrial digitalization, continuously improving cloud network integration capabilities. In terms of capital expenditure investment direction, 2022H1 focused on industrial digitalization. Industrial digitalization was the only direction where the share of capital expenditure increased year-on-year. The share of capital expenditure in 4/5G, broadband Internet, operation systems and infrastructure all declined slightly. Looking ahead to the second half of the year, the company will continue to focus on the digital capabilities of industries such as data centers, cloud resources, and ICT, accelerate the deployment of dual gigabit networks, and continue to expand optical network coverage.
Maintain profit forecasts and maintain “buy” ratings. Considering that the upward trend in the company's ARPU value may be sustainable, and the digital revenue of the industry continues to grow rapidly, we maintain the company's 2022-2024 profit forecast. The company's net profit for 2022/2023/2024 is estimated to be 290.46/321.95/35.320 billion yuan respectively. The corresponding PE is 12/11/10 times, maintaining the “buy” rating.
Risk warning: The number of mobile business users has declined, domestic industry regulatory policies have changed, and competition in industrial digital business has intensified.