CHINA TELECOM(601728) Changjiang Securities·2024-03-31 16:00Investment Rating - The investment rating for the company is "Buy" and is maintained [8] Core Views - The company achieved a double-digit profit growth in 2023, with a notable service revenue increase in Q4. The traditional business saw a steady increase in user scale, while ARPU continued to grow steadily. Emerging businesses, particularly in industrial digitalization, maintained rapid growth, with Tianyi Cloud reaching a scale of 100 billion, fully forming the framework of the national cloud and upgrading to intelligent cloud in the era of large models. Capital expenditure is expected to show a turning point in 2024, further leaning towards industrial digitalization, with leading scale in intelligent computing. The company has clear operational and dividend targets for the next three years, aiming to gradually increase the dividend payout ratio to over 75% starting in 2024, comparable to China Mobile [6][7][8]. Summary by Sections Financial Performance - In 2023, the company achieved revenue of 507.8 billion yuan, a year-on-year increase of 6.9%. The net profit attributable to the parent company was 30.4 billion yuan, up 10.3% year-on-year. In Q4 2023, revenue reached 126.7 billion yuan, growing by 8.2% year-on-year, with service revenue at 115.2 billion yuan, an increase of 8.4% year-on-year, and a net profit of 3.3 billion yuan, up 9.7% year-on-year [6][7]. User Growth and ARPU - The company reported mobile communication service revenue of 195.7 billion yuan, a year-on-year increase of 2.4%, and fixed-line and smart home service revenue of 123.1 billion yuan, up 3.8% year-on-year. The mobile user base increased by 16.59 million, leading in net growth, while broadband users increased by 9.26 million. The mobile ARPU was 45.4 yuan, up 0.4% year-on-year, and broadband access ARPU was 39.1 yuan, up 2.1% year-on-year [6][7]. Emerging Business Growth - The industrial digitalization revenue reached 138.9 billion yuan, growing by 17.9% year-on-year, accounting for 29.9% of service revenue, an increase of 2.8 percentage points from the previous year. Tianyi Cloud achieved revenue of 97.2 billion yuan, a remarkable growth of 67.9%, and is fully upgrading to intelligent cloud services [6][7]. Capital Expenditure and Future Outlook - The company completed capital expenditure of 98.8 billion yuan in 2023, a year-on-year increase of 6.8%. The guidance for 2024 indicates a capital expenditure of 96 billion yuan, a decrease of 2.9%. The structure is further leaning towards industrial digitalization, with related investments of 37 billion yuan, up 3.9% year-on-year. The intelligent computing scale reached 11.0 EFLOPS in 2023, with plans to increase to over 21 EFLOPS in 2024 [7][8]. Dividend Policy - The dividend payout ratio increased by over 5 percentage points to 71% in 2023, with a commitment to gradually raise the payout ratio to over 75% within three years starting in 2024, aligning with China Mobile's payout ratio. The company aims for service revenue to maintain good growth and for net profit growth to exceed revenue growth in the next three years [7][8].