CHINA TELECOM(601728) 天风证券·2024-10-24 00:31Investment Rating - The report maintains a "Buy" rating for China Telecom (601728) with a 6-month target price of 7.32 yuan [1][4] Core Views - China Telecom achieved steady growth in traditional and digital transformation businesses, with stable ARPU (Average Revenue Per User) [1] - The company's revenue for the first three quarters of 2024 reached 391.968 billion yuan, a 2.9% YoY increase, with service revenue growing 3.8% to 362.886 billion yuan [1] - Net profit attributable to shareholders rose 8.1% YoY to 29.299 billion yuan, with Q3 net profit increasing 7.76% to 7.487 billion yuan [1] Business Performance Mobile Communication Services - Mobile service revenue grew 3.2% YoY to 156.823 billion yuan in the first three quarters of 2024 [2] - Mobile subscribers increased by 14.9 million to 423 million, with 5G package users reaching 345 million, representing an 81.6% penetration rate [2] - Mobile ARPU remained stable at 45.6 yuan [2] Fixed Network and Smart Home Services - Fixed network and smart home service revenue increased 2.9% YoY to 95.624 billion yuan [2] - Broadband subscribers reached 196 million, with smart home revenue growing 17.0% YoY [2] - Broadband ARPU stood at 47.8 yuan, reflecting continuous value enhancement in smart home services [2] Industrial Digitalization - Industrial digitalization revenue grew 5.8% YoY to 105.549 billion yuan [2] - The company focused on integrating network, cloud, AI, and applications to meet digital transformation needs across industries [2] Financial Performance Costs and Expenses - Operating costs increased 3.0% YoY to 274.413 billion yuan, driven by investments in technological innovation and industrial digitalization [3] - R&D expenses rose 19.3% YoY to 8.750 billion yuan, reflecting increased focus on strategic emerging industries [3] - Sales and management expenses decreased by 3.2% and 0.6% respectively, demonstrating improved operational efficiency [3] Profitability and Valuation - The company is expected to achieve net profits of 33.064 billion yuan, 35.547 billion yuan, and 37.774 billion yuan in 2024-2026, with EPS of 0.36 yuan, 0.39 yuan, and 0.41 yuan respectively [4][6] - P/E ratios are projected at 18.24x, 16.96x, and 15.96x for 2024-2026, indicating attractive valuation levels [6] Shareholder Returns - China Telecom plans to increase cash dividend payout ratio to over 75% of net profit from 2024 onwards [4] - The company aims to enhance profitability and cash flow generation capabilities to create greater value for shareholders [4] Industry Outlook - The telecommunications industry continues to benefit from digital transformation trends, with 5G penetration and smart home services driving growth [2] - Integration of emerging technologies like cloud computing, AI, and quantum communication presents significant opportunities for industry players [2]