Group 1: Policy Developments - The Ministry of Industry and Information Technology (MIIT) announced a special action plan to accelerate the deployment of high-performance networks between computing power centers, aiming for a 50% deployment rate of 400Gbps and above by 2027 [1] - A joint implementation plan from seven departments emphasizes the construction of new information infrastructure and the integration of "5G + industrial internet," promoting the layout of computing power infrastructure [2] - The National Development and Reform Commission (NDRC) highlighted the "East Data West Computing" project, focusing on the deployment of computing power resources and the establishment of a unified national computing network [2] Group 2: Market Trends and Opportunities - The domestic AI computing power ecosystem is evolving, with over 90% of server bids won by domestic suppliers during the recent procurement period [3] - The report from Huaxi Securities suggests a focus on the domestic computing power industry chain, with significant growth in AI applications and computing power capabilities [3] - Companies like Weichai Power reported a 491% year-on-year increase in data center product sales, indicating a new growth point in their business [5] Group 3: Company Developments - ZTE Corporation is enhancing its data center capabilities to meet the growing demand for computing power, leveraging self-developed temperature control products to optimize energy efficiency [5] - Zhonggan Communication, known as the "first stock of computing power infrastructure" in Hong Kong, has established stable business relationships with major telecom operators in China [6] - China Telecom's Tianyi Cloud has developed an integrated intelligent computing service platform that addresses computing power scheduling challenges, utilizing a high-bandwidth network system [6]

Group 1 - The Ministry of Industry and Information Technology (MIIT) announced a plan to accelerate the deployment of high-performance networks between computing power centers, aiming for a 50% deployment rate of 400Gbps or higher by 2027 [1] - The plan includes the verification of new technologies for computing networks and aims to establish a monitoring mechanism for 1 millisecond latency coverage in urban computing power centers, targeting a 70% coverage rate by 2027 [1] - Recent policies from multiple government departments emphasize the construction of new information infrastructure and the integration of computing power with industrial applications, promoting the development of high-quality industry data sets [2] Group 2 - The domestic AI computing power ecosystem is evolving, with significant server orders from major banks and telecom companies, indicating a strong market for domestic computing power suppliers [3] - The report suggests that the domestic computing power industry chain is gaining attention, with notable growth from companies like Alibaba Cloud and Huawei, and the IPO of Moore Threads is expected to enhance the domestic computing power landscape [3] - Key beneficiaries in the computing power sector include companies involved in advanced manufacturing processes and chip architecture upgrades, such as Cambricon, Moore Threads, and SMIC [3] Group 3 - ZTE Corporation is focusing on data centers as a key infrastructure for computing power, responding to the increasing demand driven by AI and cloud computing technologies [5] - The company is developing a multi-technology cooling system to meet the energy efficiency and operational needs of modern data centers, as the number of standard racks in use is projected to exceed 8.8 million by 2024 [5] - China Telecom's Tianyi Cloud has developed an integrated intelligent computing service platform that addresses complex computing power scheduling challenges, utilizing a high-bandwidth network system [6]

Core Viewpoint - China Telecom is fully embracing artificial intelligence (AI) and upgrading its corporate strategy from "cloud transformation" to "intelligent cloud transformation" to enhance digital transformation across various industries [3][4]. Group 1: AI Integration and Services - China Telecom aims to create an integrated intelligent cloud service system combining computing power, platforms, data, models, and applications to empower digital transformation in various sectors [3]. - The company is enhancing its AI safety governance capabilities by developing a comprehensive AI dynamic protection system [3]. - The "Xingchen Textile Intelligent Body" showcased at WAIC 2025 can intelligently adjust process parameters and inspect fabric quality during production, achieving a 99% on-time delivery rate [4][6]. Group 2: Performance Improvements - China Telecom has improved the efficiency of its reasoning engine and matched computing power with minimal latency through integrated computing and networking services, resulting in over a 40% increase in computing resource utilization and a 30% reduction in average reasoning latency [4]. - The company plans to launch terminal-as-a-service and intelligent agent-as-a-service systems to further promote AI application and empower industrial intelligent transformation [4]. Group 3: Industry Applications and Models - China Telecom has developed over 80 industry-specific large models and more than 20 intelligent agent applications targeting sectors such as industry, emergency response, and education [5]. - The company emphasizes the need for an end-to-end security assurance system that encompasses infrastructure, data, models, and applications to address the diverse safety risks associated with AI [5]. Group 4: Security Measures - To tackle security challenges in the AI era, China Telecom proposes a four-in-one security model comprising early warning, assessment, protection, and operation [5]. - The "Jianwei" security model has achieved a 98% accuracy rate in fault alert identification, and the foundational security measures for large models will be open-sourced domestically to enhance resistance against AI attacks [5].

Core Insights - The 2025 World Artificial Intelligence Conference showcased the importance of computing power as the foundation of artificial intelligence, with various domestic chip and server suppliers participating to highlight the localization of computing power [1][2] - Major hardware manufacturers like Huawei and Sugon presented their latest computing solutions, including Huawei's "Ascend 384 Super Node," which is the largest in the industry, and Sugon's "Large-Scale Intelligent Computing Cluster" aimed at addressing key industry bottlenecks [1][2] - The event featured over 20 AI chip companies, with significant advancements in integrated training and inference machines, as well as cloud solutions that enhance the accessibility and efficiency of AI applications [2] Group 1 - Computing power is recognized as the cornerstone of AI, with a focus on domestic chip and server suppliers at the conference [1] - Huawei unveiled the "Ascend 384 Super Node," which consists of 12 computing cabinets and 4 bus cabinets, representing the largest scale in the industry [1] - Sugon introduced its "Large-Scale Intelligent Computing Cluster," which aims to tackle high computing costs, insufficient data efficiency, and challenges in practical application [1] Group 2 - The exhibition featured a strong presence of AI chip companies, including Moore Threads and others, showcasing their latest innovations [2] - The "Integrated Training and Inference Machine" was a highlight, with significant improvements in computing and data transmission efficiency [2] - Baidu demonstrated its self-developed 30,000-card cluster and the "百舸 AI Heterogeneous Computing Platform," promoting the widespread adoption of domestic computing power [2]

Investment Rating - The report maintains an "Overweight" rating for the telecommunications sector [6] Core Insights - The global telecommunications industry is experiencing steady demand growth, driven by emerging markets and increasing ARPU in regions like North America. AI is expected to bring transformative opportunities to the industry by enhancing operational efficiency and customer insights [1][4][12] Summary by Sections Global Telecommunications Development - The global telecommunications industry achieved a total revenue of 8.8 trillion RMB in 2024, with a year-on-year growth of 3.0%. The net profit attributable to shareholders was 834.2 billion RMB, reflecting a decline of 8.4% [12] - Revenue by region includes: Europe (2.2 trillion RMB, +4.9%), North America (2.4 trillion RMB, +2.7%), China (1.95 trillion RMB, +3.4%), Asia-Pacific (1.6 trillion RMB, -0.2%), Africa and Middle East (0.7 trillion RMB, +4.9%) [12] Market Observations - In North America and Europe, leading telecom operators are seeing steady user growth, while mobile penetration rates are high, resulting in low single-digit growth rates. In contrast, regions like India and Africa are experiencing rapid growth [2][17] - Fiber business is a significant growth driver, with AT&T's fiber revenue growing by 19% year-on-year in Q1 2025 [2] Profitability Trends - Profitability varies across regions, with Middle Eastern and North American operators showing strong profitability. The average ROE for major global telecom operators in 2024 was 15.66% [3][17] - Domestic operators in China have slightly lower ROE compared to the global average, but as 5G investments enter the recovery phase, profitability is expected to improve [3][17] AI Impact on the Industry - AI is transforming the telecommunications sector by reducing operational costs and enhancing customer service capabilities. For instance, Deutsche Telekom uses AI to monitor network performance and improve fiber deployment efficiency [4][22] - Companies like T-Mobile are leveraging AI to predict customer needs and enhance service offerings, improving customer satisfaction [4][22] Domestic Telecommunications Dynamics - In China, the telecommunications business revenue for the first five months of 2025 reached 748.8 billion RMB, a year-on-year increase of 1.4%. The average mobile internet access traffic per user reached a record high of 21.3 GB/month, up 14.9% year-on-year [5][57] - The three major operators in China are expanding their intelligent computing capabilities, with China Mobile achieving a computing power scale of 43 EFLOPS [5] Key Recommendations - The report recommends focusing on major Chinese telecom operators: China Mobile, China Telecom, and China Unicom, all rated as "Buy" or "Overweight" [9]

Investment Rating - The investment rating for the company is "Accumulate" [5] Core Views - The company achieved a revenue of 529.42 billion yuan in 2024, representing a year-on-year growth of 3.1%, with service revenue reaching 482.03 billion yuan, up 3.7% year-on-year. The net profit attributable to shareholders was 33.01 billion yuan, an increase of 8.4% year-on-year [1] - The company is focusing on enhancing its digital infrastructure and AI capabilities, with a capital expenditure of 93.52 billion yuan in 2024, and plans to increase computing power investment by 22% [3] - The company is committed to shareholder returns, distributing 72% of its profits in cash dividends for 2024, with a planned increase to over 75% in the next three years [5] Summary by Sections Financial Performance - In 2024, the company reported an EBITDA of 140.85 billion yuan, a growth of 2.9% year-on-year, and a return on equity (ROE) of 7.3%, up 0.4 percentage points [1] - Free cash flow reached 22.18 billion yuan, marking a significant increase of 70.7% [1] Business Segments - Mobile communication service revenue was 202.5 billion yuan, growing by 3.5%, with mobile value-added and application revenue increasing by 16.1%. The mobile user base reached 425 million, with an average revenue per user (ARPU) of 45.6 yuan [2] - Fixed-line and smart home service revenue was 125.7 billion yuan, up 2.1%, with smart home revenue growing by 16.8%. Broadband users reached 197 million, with a broadband ARPU of 47.6 yuan [2] - Digital industry revenue was 146.6 billion yuan, a growth of 5.5%, accounting for 30.4% of service revenue, an increase of 0.5 percentage points [2] Strategic Initiatives - The company is advancing its digital infrastructure, with significant investments in AI and cloud services, including the establishment of high-capacity data centers and a new intelligent computing network [3][4] - The Tianyi Cloud platform is evolving into a smart cloud service, integrating various AI capabilities and achieving significant partnerships to enhance its service offerings [4] Shareholder Returns - The company distributed a cash dividend of 0.2598 yuan per share in 2024, with a year-on-year increase of 11.4% in total dividend payout [5] - The commitment to increase cash distribution to shareholders to over 75% of profits in the next three years reflects a strong focus on shareholder value [5]

Investment Rating - The report maintains a "Recommended" rating for China Telecom, with a target price of 7.57 CNY [7][4]. Core Insights - In 2024, China Telecom achieved a revenue of 523.6 billion CNY, representing a year-on-year growth of 3.1%, and a net profit attributable to shareholders of 33.0 billion CNY, up 8.4% year-on-year [1][4]. - The company is experiencing steady growth in its core business, with mobile communication service revenue reaching 202.5 billion CNY, a 3.5% increase year-on-year, and mobile ARPU rising to 45.6 CNY, up 0.4% [2][4]. - The digital industry segment is showing strong growth, with revenue from industrial digitalization reaching 146.6 billion CNY, a 5.5% increase, and Tianyi Cloud revenue growing by 17.1% to 113.9 billion CNY [3][4]. Summary by Sections Financial Performance - In 2024, operating cash flow was 145.3 billion CNY, up 4.8%, and free cash flow surged by 70.7% to 22.2 billion CNY [1][4]. - The company plans to increase its dividend payout ratio to over 75% in the next three years, with a dividend of 0.2598 CNY per share in 2024 [4]. Business Segments - Mobile communication services saw a net increase of 16.75 million users, bringing the total to 425 million, while fixed-line and smart home services generated 125.7 billion CNY, a 2.1% increase [2][4]. - The company is focusing on enhancing its AI and cloud services, with significant investments in smart computing resources and partnerships [3][4]. Future Projections - The report forecasts continued growth in revenue and profit, with net profit expected to reach 35.9 billion CNY in 2025, reflecting a 9% year-on-year increase [4][6]. - The projected PE ratios for 2025, 2026, and 2027 are 20, 18, and 17, respectively, indicating a stable valuation outlook [4][6].

Investment Rating - The report maintains a "Recommended" rating for China Telecom, with a target price of 7.57 CNY [7][4]. Core Views - China Telecom's revenue for 2024 is projected at 523.6 billion CNY, reflecting a year-on-year growth of 3.1%, while the net profit attributable to shareholders is expected to reach 33 billion CNY, up 8.4% year-on-year [1][4]. - The company is experiencing steady growth in its core business, with mobile communication service revenue reaching 202.5 billion CNY, a 3.5% increase year-on-year, and a net increase of 16.75 million mobile users, bringing the total to 425 million [2][4]. - The digital industry segment is showing strong growth, with revenue from industrial digitalization reaching 146.6 billion CNY, a 5.5% increase year-on-year, and cloud services revenue growing by 17.1% to 113.9 billion CNY [3][4]. Summary by Sections Financial Performance - In 2024, operating cash flow is reported at 145.3 billion CNY, up 4.8% year-on-year, and free cash flow has significantly increased by 70.7% to 22.2 billion CNY [1][4]. - The company’s capital expenditure for 2024 is 93.5 billion CNY, a decrease of 5.4% compared to the previous year, with a focus on mobile network and industrial digitalization investments [4]. Business Segments - Mobile communication services revenue is driven by the upgrade to 5G-A and the introduction of AI-enhanced applications, with mobile ARPU reaching 45.6 CNY, a slight increase of 0.4% [2][4]. - The smart home services segment has also shown growth, with revenue increasing by 16.8% year-on-year [2][4]. Future Outlook - The report forecasts continued growth in revenue and profit for the next three years, with net profit expected to reach 35.9 billion CNY in 2025, reflecting a growth rate of 9% [4][6]. - The dividend payout ratio is set to increase to over 75% in the next three years, with a dividend of 0.2598 CNY per share for 2024 [4].

Core Insights - China Telecom reported a revenue of 529.4 billion yuan for 2024, representing a year-on-year growth of 3.1% [1] - The company achieved a net profit of 33 billion yuan, up 8.4% year-on-year, with an EBITDA of 140.8 billion yuan, reflecting a growth of 2.9% [1] - The strategic focus on AI and quantum technology is highlighted as a key area for future growth [4][5] Revenue Performance - Operating revenue reached 529.4 billion yuan, with service revenue at 482 billion yuan, marking a growth of 3.7% [1] - Mobile communication service revenue was 202.5 billion yuan, up 3.5%, while mobile value-added and application revenue grew by 16.1% [3] - The digital industry revenue increased by 5.5%, contributing to 30.4% of service revenue [3] Emerging Business Growth - Tianyi Cloud revenue reached 113.9 billion yuan, growing by 17.1% [3] - Intelligent revenue surged by 195.7% to 8.9 billion yuan, indicating strong potential in AI business [3] - Security revenue increased by 17.2% to 16.2 billion yuan, and video network revenue grew by 40.1% [3] Capital Expenditure and Cash Flow - Capital expenditure for 2024 was 93.5 billion yuan, down 5.4% year-on-year [2] - Free cash flow reached 22.2 billion yuan, reflecting a significant increase of 70.7% [2][8] - The company plans to gradually increase the cash dividend payout ratio to over 75% within three years [2][8] Strategic Focus on AI and Quantum Technology - The company has established a comprehensive AI strategy, launching over 50 industry models and serving more than 10,000 clients [4] - In quantum technology, China Telecom is advancing quantum security infrastructure and has developed a new password system [5] - The intelligent computing resources reached 62 EFLOPS, enhancing competitiveness in the intelligent computing sector [6] Infrastructure Development - The company is enhancing digital infrastructure, with 5G base stations totaling 1.375 million, achieving nationwide coverage [7] - The deployment of 10G PON ports reached 9.29 million, with urban residential coverage exceeding 95% [7] - The company is committed to green development, reducing carbon emissions by 19.2% year-on-year [7][8]