FY23 net profit increased by 6.7%, in line with market expectations
- Revenue increased by 5.6% y-o-y to Rmb148.6bn in FY23, with domestic non-operator revenue increasing by 6.3%
- Net profit increased by 6.7% y-o-y to Rmb3.6bn, in line, with gross margin expanding 0.2ppt to 11.6%
- We currently rate BUY on CCS for its attractive dividend yield of 7%; TP of HK$4.9
FY23 net profit increased by 6.7%, in line. China ComService (CCS, 552 HK) announced its FY23 results on 27 March 2024 after morning trading session. Revenue increased by 5.6% y-o-y to Rmb148.6bn, driven by 6.3% y-o-y revenue growth in domestic non-operator market, with revenue contribution expanding 0.3ppt to 42.7%. By business segments, telecommunications infrastructure services (“TIS”), business process outsourcing (“BPO”), and applications, content and others (ACO) grew by 4.4%, 1.1% and 16.8% y-o-y respectively, accounting for 51.2%, 29.3% and 19.5% of total revenue respectively. Gross profit increased by 8.0% y-o-y to Rmb17.3bn with gross margin expanding 0.2ppt to 11.6%. Net profit increased by 6.7% y-o-y to Rmb3.6bn, in line with market expectations.
Maintain BUY for its attractive dividend yield of 7%. Management shared that the value of total new contracts increased by 8% y-o-y to Rmb204bn in FY23. Among which, value of new contracts from strategic emerging businesses (including data centre, cloud and smart city projects) increased by more than 30% y-o-y, contributing c.30% of total value of new contracts. We remain positive on the company’s outlook, as we expect the ongoing national digitisation development will continue to support growth in its operator and non-operator businesses. In terms of shareholders return, the Board has proposed a final dividend of Rmb0.2174 per share for FY23, representing a y-o-y increase of 12% and a final dividend payout ratio of 42% (FY22: 40%; the company has been consistently increasing its payout ratio for 2ppts for the past 4 consecutive years). We currently rate BUY on the stock for its attractive dividend yield of 7%. TP of HK$4.9.