Investment Rating - The report assigns a "Buy" rating for the company [10] Core Views - The company benefits from good collection quality from both operator and non-operator customers, leading to ample cash on hand and stable free cash flow growth. The dividend per share has been increasing annually, with a payout ratio expected to reach 42% in 2024, indicating significant potential for further increases. The company relies on operators for a stable performance base while capitalizing on the growth in strategic emerging and ACO businesses, maintaining a non-GAAP growth rate of approximately double digits over the past three years, making the current valuation attractive [2][8]. Summary by Sections Company Overview - The company is backed by China Telecom Group, with the actual controller being the State-owned Assets Supervision and Administration Commission. As of the 2024 interim report, China Telecom Group holds 48.99% of the company's shares [5][17]. Business Performance - The company has shown steady revenue and profit growth, with 2022-2024 revenues of 140.7 billion, 148.6 billion, and 150 billion respectively, reflecting year-on-year growth rates of 5.04%, 5.59%, and 0.93%. Net profits for the same period were 3.358 billion, 3.584 billion, and 3.607 billion, with growth rates of 6.36%, 6.69%, and 0.63% [22][24]. Strategic Emerging Business Contribution - The company signed new contracts worth approximately 211 billion in 2024, a year-on-year increase of about 3%. The strategic emerging business contributed over 78 billion in new contracts, effectively offsetting pressures from other orders. The four main strategic emerging business areas and their respective growth rates for new contracts in 2024 are: digital infrastructure 30%+, green low-carbon 25%+, smart city 40%+, and emergency safety 30%+ [6][57]. Main Business Segments - TIS (Telecom Infrastructure Services) and BPO (Business Process Outsourcing) have maintained steady growth, while ACO (Application, Content, and Other Services) has seen rapid growth, becoming a key driver of the company's performance. In 2024, revenues from TIS, BPO, and ACO were 751.72 billion, 434.59 billion, and 313.69 billion respectively, with year-on-year changes of -1.27%, -0.21%, and +8.44% [40][75]. Cash Flow and Dividend Policy - The company has a strong cash flow position, with free cash flow steadily increasing. The cash assets on hand are sufficient to cover annual rigid expenditures, including capital expenditures and dividends. The dividend payout ratio is expected to reach 42% in 2024, indicating significant room for further increases [49][54].
中国通信服务（00552）：稳中有进，向新而行