CHINA TELECOM(601728) Changjiang Securities·2024-05-06 02:33Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Views - The company's service revenue growth is impressive, with a good increase in net profit attributable to the parent company. The ARPU remains stable, and the production and data business continues to show double-digit growth. The depreciation and amortization ratio to revenue has decreased, and the company is increasing its capacity investments and incentivizing technology innovation talent. A turning point in capital expenditure is expected, with a dividend policy comparable to China Mobile. The company has guided for good growth in service revenue over the next three years, with net profit growth expected to outpace revenue growth, and has announced a new three-year dividend commitment, indicating high certainty in both growth and dividends [5][6][7]. Summary by Sections Financial Performance - In Q1 2024, the company achieved operating revenue of 134.5 billion yuan, a year-on-year increase of 3.7%. The net profit attributable to the parent company was 8.6 billion yuan, up 7.7% year-on-year. Service revenue reached 124.3 billion yuan, growing 5.0% year-on-year, the fastest among the three major operators [5][6]. Revenue Breakdown - Mobile communication service revenue in Q1 2024 was 52.2 billion yuan, a 3.2% increase year-on-year. Fixed-line and smart home service revenue was 31.8 billion yuan, up 2.2% year-on-year. The ARPU for mobile services was 45.8 yuan, stable year-on-year, while the broadband comprehensive ARPU was 48.6 yuan, a 2.3% increase year-on-year. The digital industry revenue reached 38.7 billion yuan, growing 10.6% year-on-year [5][6]. Cost and Expenditure - The company's operating expenses in Q1 2024 were 124.9 billion yuan, a 3.6% increase year-on-year. Network operation and support costs rose by 6.6%, driven by improvements in cloud network service quality. Personnel costs increased by 4.8% due to incentives for technology and innovation talent. Depreciation and amortization grew by 2.8%, with the ratio to revenue decreasing by 0.2 percentage points to 18.1% [5][6]. Capital Expenditure and Dividends - The company has guided for capital expenditure of 96 billion yuan in 2024, a decrease of 2.9% year-on-year, indicating a turning point. Investments in digital industry are expected to be 37 billion yuan, a 3.9% increase year-on-year. The company plans to increase its dividend payout ratio to over 75% over the next three years, aligning with China Mobile's dividend policy [6][7]. Profit Forecast - The forecast for net profit attributable to the parent company for 2024-2026 is 33.1 billion yuan, 35.6 billion yuan, and 38.0 billion yuan, corresponding to year-on-year growth rates of 8.6%, 7.7%, and 6.7%, with price-to-earnings ratios of 17x, 15x, and 14x respectively [6].