Shanxi Securities·2024-08-21 17:30Investment Rating - The report maintains a "Buy-A" rating for China Telecom (601728.SH) [2][5] Core Views - China Telecom's service revenue growth continues to outpace industry averages, with a focus on digital transformation and AI capabilities [3][4] - The company is expected to achieve steady revenue and profit growth, with a decreasing capital expenditure-to-revenue ratio and an increasing dividend payout ratio [5] Company Performance Overview - In H1 2024, China Telecom achieved a revenue of 2,660 billion yuan, a year-on-year increase of 2.8%, with service revenue at 2,462 billion yuan, up 4.3% [3] - The company reported a net profit attributable to shareholders of 218 billion yuan, reflecting an 8.2% year-on-year growth [3] - Mobile user base grew by nearly 10 million, reaching 417 million, while broadband users increased by 3.2 million [1][3] - The average revenue per user (ARPU) for mobile and broadband services showed a slight increase of 0.1 yuan year-on-year [1] Financial Projections - Expected net profit for 2024-2026 is projected at 333.54 billion yuan, 363.56 billion yuan, and 392.09 billion yuan, respectively, with year-on-year growth rates of 9.6%, 9.0%, and 7.8% [5] - Earnings per share (EPS) is forecasted to be 0.36 yuan, 0.40 yuan, and 0.43 yuan for the years 2024, 2025, and 2026, respectively [5] - The price-to-earnings (P/E) ratio is expected to decrease from 17.0 in 2024 to 14.4 by 2026, indicating potential valuation upside compared to international peers [5] Business Segment Insights - The digital services segment, particularly Tianyi Cloud, is a key growth driver, with revenue from cloud services increasing by 26% year-on-year [1][4] - The company is expanding its AI capabilities and has established a leading integrated intelligent computing service platform, enhancing its competitive position in the market [1][4]