The leader in communication equipment has shown steady performance in Q1 and is comprehensively laying out an AI computing power network.

In the first quarter of 2024, a well-known telecommunications equipment company released its financial report, showing revenue of 30.58 billion yuan, a year-on-year rise of 4.9%. The net profit attributable to the parent company was 2.74 billion yuan, a year-on-year rise of 3.7%. The net profit attributable to the parent company after deducting non-recurring gains and losses was 2.65 billion yuan, a year-on-year rise of 7.9%. The overall operational performance showed a steady upward trend.

In the first quarter of 2024, the company's gross profit margin reached 42.0%, an increase of 6.0 percentage points compared to the previous quarter, maintaining a high level. Expense control has further optimized, with a net profit margin increasing by 0.1 percentage points year-on-year and 4.8 percentage points quarter-on-quarter, reflecting the company's good operational quality. The net operating cash flow for the quarter was 2.98 billion yuan, a year-on-year increase of 28.3%, indicating a healthy cash flow situation. Overall, the company demonstrated good operational conditions in the first quarter, with steady improvement in report quality, laying a solid foundation for the annual performance.

Against the backdrop of rapid global development in artificial intelligence, the company is actively leveraging its full-stack and all-domain technological advantages to support the healthy development of domestic intelligent computing infrastructure. In terms of hardware, the company provides solutions covering all computing power fields in general and intelligent computing, as well as high-speed network interconnection, including general computing servers and 400G/800G backbone transmission. In the field of intelligent computing, the company has launched a fully decoupled full-stack intelligent computing solution, compatible with mainstream CPU/GPU from both domestic and international sources, providing fully domestic 100G/200G network cards, and supporting thousand-card-level GPU interconnection in a single pod resource pool. In 2024, a new generation 400G Fabric solution will be released, while also laying out the next generation 800G Fabric solution to accelerate the transition towards connectivity and computing power.

In terms of carrier business, the company maintains steady development and actively seeks structural improvements to create new rise points. Currently, the construction of 5G has entered the mid-to-late stage, with overall capital expenditure from carriers tending to stabilize and structurally beginning to lean towards computing power networks. The carrier network business, as the main source of the company's revenue and profit, is facing some adjustments. To this end, the company actively explores potential space, enhancing market share in areas such as 400G OTN, core routers, and FTR. At the same time, the company is actively deepening its expansion into the connectivity and computing power fields, aligning with the national policy orientation focusing on new quality productivity, and cooperating with carriers to promote the widespread application of digital intelligence technology, jointly expanding the commercial market, and seeking performance increments.

Looking ahead, the company, as a leader in the ICT industry, possesses full-stack and all-domain technological advantages, with significant accumulations in both communication and computing fields. With the continuous development of artificial intelligence, the company will accelerate related layouts to provide a complete set of solutions for domestic AI development. In addition, in terms of operator business, the company is enhancing its market share in niche markets by tapping into its endogenous potential. Considering the slowdown in operator capital expenditure and the relatively small profit contribution from intelligent computing, it is expected that the net profit attributable to the parent company for the years 2024-2026 will be 9.49 billion, 10.09 billion, and 10.95 billion, respectively.

Risk factors to be aware of include: the decline in prices of 5G network equipment, AI advancements falling short of expectations, and the escalation of international trade frictions.