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What was the recent operating performance of the Company?
In the first half of 2023, the Chinese government accelerated the development of digital economy to promote the in-depth integration of the digital economy and the real economy. Leveraging its positioning as a “New Generation Integrated Smart Service Provider”, the Group aims to build itself as a “First-class Smart Service Innovative Enterprise”, focuses on strategic emerging businesses for future development, and strives to become the “Main Force in Digital Infrastructure Construction, Vanguard in Smart City Services, Leading Enterprise in Industrial Digitalization Services and Trusted Expert in Smart Operation”. With high-quality development as the principle and value creation as the focus, the Group was committed to pursuing the steady development of its fundamental businesses while expediting the business expansion in the strategic emerging industries, leveraging technological innovation as the lead, enhancing its product and service values, advancing reform in key areas, continuously enhancing its core competitiveness, thus achieving steady growth in its operating results.

With the philosophy of “Effective Improvement in Quality and Reasonable Growth in Quantity”, the Group seized the opportunities arising from the construction of Digital China and achieved steady growth in revenue, continuous improvement in both gross profit margin and net profit margin, as well as a sustained positive trend in indicators such as cash flow and shareholders’ return. In the first half of the year, the Group’s total revenues amounted to RMB73,170 million, representing a year-on-year increase of 5.7%, among which, service revenue amounted to RMB70,713 million, representing a year-on-year increase of 6.3%. Gross profit was RMB7,834 million, representing a year-on-year increase of 7.4%. Gross profit margin was 10.7%, representing a year-on-year increase of 0.2 percentage point, continuing the stabilization and recovery trend. Net profit was RMB2,034 million, representing a year-on-year increase of 7.3%, and such growth rate continued to be higher than the revenue growth rate. Net profit margin was 2.8%, which stabilized and improved on a year-on-year basis. Free cash flow recorded a year-on-year improvement. Return on equity (ROE) was 10.0%, representing a further enhancement on a year-on-year basis. Basic earnings per share were RMB0.294, representing a year-on-year increase of 7.3%.
Why did the Company's gross profit margin continue the stabilization and recovery trend in 2022? And what would be the trend going forward?
In the first half of 2023, the Group recorded gross profit of RMB7,834 million, representing an increase of 7.4% over RMB7,294 million in the first half of 2022. The Group’s gross profit margin in the first half of 2023 was 10.7%, representing an increase of 0.2 percentage point from 10.5% in the first half of 2022, indicating that the stabilization and recovery of the gross profit margin was sustained. While balancing its development scale, the Group put stronger emphasis on improving quality and efficiency and guided the Group’s subsidiaries to select and develop high-margin projects through appraisal. At the same time, the Group continuously strengthened project management and cost control and strived to enhance the value creation capability of its business. As a result of the above measures, gross profit margin continued to improve. With the Group’s deepening deployment in digital economy, new infrastructure construction and industrial digitalization, the proportion of high-value businesses will gradually increase and thereby driving the Group’s overall gross profit margin to maintain an upward trend.
Digital economy in China has been developing rapidly, how did it benefit the development of the domestic non-telecom operator ("domestic non-operator") market of the Company? What measures did the Company implement to seize the opportunities? What services does the Company provide in such market?
The Group focused on strategic emerging industries and strengthened its core products, services and capabilities that fit the industry development and the ecosystem of customers. By deeply exploring the business needs such as digital government, digital transformation of enterprises, intelligent computing centers, electricity infrastructure and ancillary facilities as well as photovoltaic construction, and leveraging the Group’s “Consultant + Staff + Housekeeper” service advantages and “Platform + Software + Service” capability advantages, the development quality of such market continued to be reinforced. In the first half of 2023, revenue from the domestic non-operator market amounted to RMB31,623 million, representing a year-on-year increase of 3.6%.

The Group strove to provide integrated comprehensive smart solutions to enterprise customers in the domestic non-operator market, providing a comprehensive smart product portfolio that could be disassembled or combined, as well as full-process service capabilities from top-level design to product R&D and operation. In view of the vast opportunities arising from the rapid development of Digital China, the Group has accelerated its deployment in strategic emerging industries, such as digital infrastructure, smart city, green and low-carbon, emergency management and security. For data center business, the Group leveraged its high-end consulting and design capabilities and applied BIM digitalization technology to provide customers with full-profession, integrated and full life cycle specialized services for green and low-carbon digital infrastructure, which included consultation and design, electromechanical installation, application and integration of network platforms, as well as operation and maintenance. In the fields of smart city and digital government, the Group focused on the new urbanization construction and urban renewal, the revitalization of old neighbourhood and community development, and important needs of smart transportation, safe city, smart government services, smart towns, city brains, one platform unified services and digital villages, and provided customers with design, construction, platform development, system integration and full-process consultation and other services. Regarding green and low-carbon sector, the Group offered integrated AI energy-saving and carbon reduction service for new green and low-carbon data centers to different types of customers. Apart from that, the Group provided new energy solutions including photovoltaic energy, wind power and hydropower solutions. Besides, it engaged in platform development and services for the dual carbon management cloud platform, energy consumption monitoring management platform and carbon asset digitalized management platform. It also offered energy management, production and manufacturing equipment disposal management. As for cybersecurity, the Group offered asset surveying and mapping, situational awareness, data security and password application and other cybersecurity products and solutions to customers. In respect of emergency management sector, it developed, maintained and optimized the risk monitoring and alert platform for customers.
What strategy did the Company adopt to achieve relatively fast revenue growth in the domestic telecommunications operator market as investment in 5G network by domestic telecommunications operators has peaked?
The Group actively responded to the changing needs of domestic telecommunications operator customers in data center, computing power network and industrial digitalization, and gave full play to the advantages of its differentiated capabilities in software research and development, system integration and support services, etc. The Group kept enhancing its proficiency in project management and in delivering projects in high quality to facilitate the transformation and upgrading of the operator customers, collaborating with operators to develop the incremental potential for digital economy and building a symbiotic and win-win ecosystem. In the first half of 2023, revenue from domestic telecommunications operator market amounted to RMB39,977 million, representing a year-on-year increase of 7.5% and accounting for 54.7% of the total revenues, making it the largest contributor to revenue growth among all customer groups.

In the first half of 2023, the Group seized opportunities from the State in promoting the moderately accelerating deployment of new infrastructure construction, as well as the rapid development of digital technology innovation and application, to actively enhance capabilities in whole-process planning and consultation, general contracting, general integration and integrated delivery, achieving relatively fast growth in domestic telecommunications operator market. Domestic telecommunications operators have been shifting their investment focus to intelligent computing network and industrial digitalization. Due to the increasing scale of new infrastructure construction, businesses from telecommunications infrastructure services and applications, content and other services in domestic telecommunications operator market maintained favorable growth, up 8% and 24% year-on-year respectively.
How was the Company's development in overseas market? And what is the Company's outlook in the development of the overseas market?
Centering on key regions along the “Belt and Road”, the Group developed high-quality projects, proactively promoted the cooperation with Chinese companies in the ecosystem, and provided overseas customers with construction services of digital infrastructure, photovoltaic and new types of energy storage, resulting in a continuous increase in the proportion of high-value businesses and operating efficiency enhancement. In the first half of 2023, revenue from overseas market amounted to RMB1,570 million, representing a year-on-year increase of 1.2%.

There is huge market potential in overseas market due to strong demand from digital economy along the “Belt & Road”, investment increase from overseas telecommunications operators, and steady growth in overseas investment by Chinese companies. The Group will further optimize the deployment overseas, penetrate key regions and key customers, focus on key businesses such as communications, data center, dual carbon, energy and electricity, smart products and services, and strengthen risk control, with a view to achieving safe and effective development in overseas market.
What were the Company's performance in businesses of TIS, BPO and ACO?
In the first half of 2023, with the in-depth promotion of the Digital China strategy and the acceleration of digital information infrastructure construction, the Group seized the opportunities arising from 5G, new infrastructure construction as well as industrial digitalization and enhanced its integrated comprehensive smart service capabilities, thus making telecommunications infrastructure (“TIS”) services the largest contributor in driving business growth. Benefited from the rapid growth of the digital infrastructure business, revenue from the Group’s TIS services amounted to RMB37,688 million, representing a year-on-year increase of 7.5%, accounting for 51.5% of total revenues. Among which, the growth was steered by high-value consultation and design businesses, with the revenue of design service amounted to RMB5,200 million, representing a year-on-year increase of 15.3%, which showed the business quality of the segment improving continuously.

The Group further consolidated its resources and promoted specialized operations, resulting in steady growth in business process outsourcing (“BPO”) services that possess attributes such as strong customer loyalty and short cash conversion cycle. Revenue from such business segment amounted to RMB21,729 million, representing a year-on-year increase of 0.9%, accounting for 29.7% of total revenues.

By strengthening innovation and research and development consistently and seizing the development opportunities from the acceleration of the digitalization and intelligentization retrofit in traditional industries, the Group carried out iterative upgrade on its smart products and solutions and effectively fulfilled the customers’ demand for digitalization. Revenue from applications, content, and other (“ACO”) services amounted to RMB13,753 million, representing a year-on-year increase of 8.6%, accounting for 18.8% of total revenues, and maintained a favorable growth momentum. Among which, revenue from software development and system support grew rapidly by 31.5% year-on-year, signifying market recognition of the Group’s capability in terms of its software and digital services.
Facing the enormous opportunities from Digital China, what is the Company’s strategic positioning? What is the Company’s deployment in Digital China and how does it drive the Company’s business development?
Currently, digitalization is spawning disruptive industrial changes, and the integration of digital economy and real economy is deepening, bringing rare strategic opportunities to the Group. Capitalizing on the development of industrial digitalization, the Group will deeply participate in the construction of Digital China. By leveraging its positioning of “1 Positioning, 4 Roles” (persisting in “New Generation Integrated Smart Service Provider” strategic positioning and targeting to become “the Main Force in Digital Infrastructure Construction, the Vanguard in Smart City Services, the Leading Enterprise in Industrial Digitalization Services, and a Trusted Expert in Smart Operation”), the Group will persist in high-quality development as the principle, value creation as the focus, and digital transformation as the driver and continuously focus on strategic emerging industries with broad prospects and enormous market potential, including digital infrastructure, smart city, green and low-carbon, emergency management and security. In the first half of 2023, the Group’s total new contracts value increased by over 6%. Among which, new contracts value from strategic emerging businesses increased by over 30%, becoming the major contributor to new contracts growth.

In the field of digital infrastructure, the Group grasped the opportunities in respect of the construction of data centers, intelligent computing centers and supercomputing centers presented by the national “East-To-West Computing Resources Transfer” project and AIGC. And it also closely followed the main development direction of clustering, low-carbon transformation and computerization of data centers, as well as the opportunities in the construction of operators’ cloud and industrial cloud, with a focus on new digital infrastructure, including data center and computing power network, cloud business and enterprise-level 5G+. The Group established the Digital Infrastructure Industry Research Institute, conducted in-depth customer insights, and strengthened its products and solutions empowerment, enabling it to successfully undertake several general contracting projects with contract value of over RMB100 million each.

In the field of smart city, steered by the top-level design of smart cities, the Group capitalized on the advantages of its “Consultation + General Contracting + Software + Platform + Service” integrated service capability, and put extra efforts in the development of key areas such as digital government, enterprise digital transformation and smart transportation. The Group built professional teams that catered to customers’ core needs, continuously improved quality of localized delivery and operation to form standardized cases and replicated and promoted such cases rapidly. The Group contributed to the intelligentization of urban management, and was shortlisted in the “2023 Digital Government Industry Mapping” published by the China Academy of Information and Communications Technology, demonstrating its growing brand influence.

In the new field of green and low-carbon, the Group remained committed to serving the national “Dual Carbon” strategic goal, and further developed the markets of different sub-sectors, including electricity infrastructure and ancillary facilities, photovoltaic construction, energy usage services and carbon management. By integrating 5G, Internet of Things (IoT), cloud computing, big data, artificial intelligence and other technologies as well as forging the Group’s advantage in full life cycle integrated comprehensive services, it provided intelligentization and decarbonization services to customers in key industries, such as energy and electricity, transportation, real estate and construction, industrial manufacturing as well as information and communications. The Group commenced an all-round strategic collaboration with China Beijing Green Exchange in connection with the construction of green and safe data centers as well as informatized infrastructure network. Besides, it engaged 25 scientific research institutes and higher education institutions to carry out forward-looking joint cooperation between industries, universities and research institutes on “Dual Carbon”, in a bid to support China’s goal of green development.

In the field of emergency management and security, the Group focused on the scenario-based needs of regulatory authorities and key industry customers, increased synergistic research and development efforts, strengthened resource coordination and sharing, and focused on developing core products such as asset surveying and mapping, situational awareness, safe production supervision, risk monitoring and early warning as well as emergency rescue command, etc. The Group stepped up the nationwide promotion of the products and achieved mutual facilitation between research and development and market.
Which areas did the Company invest research and development in? What were the results?
The Group strengthened the leading role of technological innovation and continuously enhanced its core capabilities to firmly support its expansion into the strategic emerging industries and its effort to build a technology-based enterprise. The Group continued to increase its investment in research and development, optimized its technological innovation system, focused on industrial digitalization application research and development, and core professional technical fields such as IoT, blockchain, dual carbon energy-saving technology and cybersecurity, to create benchmark solutions and core products as well as improving research and development efficiency. The Group enhanced the efficiency in the collaboration between the research and development team, the marketing team, and the delivery team, and thus rapidly improved the efficiency in product promotion. The Group vigorously introduced high-end expert teams and technology talents, continuously strengthened its core competitiveness, with a view to driving high-quality development with technological innovation. The Group’s technological strength continues to be recognized by society, ranking 4th in the “100 Most Competitive Software & IT Service Enterprises 2023” by the China Federation of Electronics and Information Industry for the third consecutive year. It was also selected in the “China Cybersecurity Industry Panorama” by AQNIU and successfully shortlisted as a representative vendor in the “China Cybersecurity Industry Momentum List” by ROARTALK.

The Group advanced on research and development under the leadership of China Comservice General Research Institute. Focusing on “1 Positioning, 4 Roles” in key technology applications and innovation, it further increased research and development investment. The Group has invested approximately RMB27 billion in research and development since the “13th Five-Year Plan”. The Group managed relevant resources in a centralised manner to solidify the technological innovation system that comprised “three tiers of research and development management + three tiers of research and development production”. The Group refined technological innovation management through three core functions, which were the strategic management, project management and integrated management of research and development efforts. Special emphasis was put on the deployment in five major aspects, namely the industrial research institute, the digitalization capability middle platform, industrial application products, network information security and emergency management. Currently, the Group has around 20 product research and development centers and over 30 industrial application products have been developed, covering various industries and sectors such as smart city, digital government, cybersecurity, Industrial Internet, smart sport, smart community and intelligent building. It also has a proprietary innovation middle platform, integrated cloud management platform, CCS IoT, maintenance cloud, blockchain platform and other core platforms. The Group insisted on carrying out research and development and innovation independently and accelerated the transformation of research and development results to promote rapid growth of related businesses.
What was the dividend paid by the Company? What's the dividend policy of the Company?
Considering the solid operating results and the favourable cash flow for the full year, and to further increase shareholders’ return, the Board has proposed to increase the total dividend payout ratio from 38% in 2021 to 40% for the financial year ended 31 December 2022, representing a final dividend of RMB0.1939 per share with an increase of 12.0% over the total dividend per share of last year. (Please refer to "Dividend History" for more details)

The Company attaches great importance to the returns of shareholders. Taking into the consideration of the long-term interest and sustainable development of the Company, and with the support of the Group's profitability, the Company strives to maintain the continuity and stability of the dividend policy. The factors to be considered by the Company when formulating the dividend distribution plan are as follows:
1. current and expected operating results and cash flow performance;
2. future business development strategies and operating position, as well as future capital needs;
3. daily working capital needs;
4. expectations of shareholders and investors; and
5. other factors that the Board deems appropriate.

 

Basic Information

What kind of Company is China Comservice?
China Comservice (China Communications Services Corporation Limited) is a leading service provider in the informatization sector in the PRC that leverages to the position as a "New Generation Integrated Smart Service Provider", targets to become “the Main Force in Digital Infrastructure Construction, the Vanguard in Smart City Services, the Leading Enterprise in Industrial Digitalization Services, and a Trusted Expert in Smart Operation” (“1 Positioning, 4 Roles”), and commits to "Building Smart Society, Boosting Digital Economy, Serving a Good Life". The Group provides integrated comprehensive smart solutions for the informatization and digitalization sectors. It is also the largest telecommunications infrastructure service provider in the PRC. Our services include telecommunications infrastructure services (TIS) covering design, construction, and project supervision and management; business process outsourcing services (BPO) covering network maintenance, property management, supply chain and products distribution; applications, content and other services (ACO) covering system integration, software development and system support, value-added services and other services. (Please refer to "Corporate Profile" and "History" for more details)
When was China Comservice listed?
The Company was listed on the Stock Exchange of Hong Kong on December 8, 2006. The offering price was HK$2.20 per share. (Please refer to "Share Information Overview" for more details)
Who are the major shareholders of China Comservice?
China Telecommunications Corporation is our controlling shareholder which holds 3,393 million domestic shares, representing 48.99% of our total issued shares. In addition, China Mobile Communications Group Co., Ltd., China United Network Communications Group Company Limited, State Grid Information & Telecommunication Technology Group Co., Ltd. and China National Postal and Telecommunications Appliances Co., Ltd. hold 608 million, 236 million, 166 million and 131 million domestic shares, representing 8.78%, 3.41%, 2.40% and 1.89% of total issued shares respectively. The public holding is 2,391 million H share, representing 34.53% of our total issued shares. (Please refer to "Shareholding Structure" for more details)
Who are the major customers of China Comservice?
All major telecommunications operators in China, namely, China Telecommunications Corporation, China Mobile Communications Group Co., Ltd., China United Network Communications Group Company Limited, China Radio and Television Network Co., Ltd and China Tower Corporation Limited are our customers. We also provide services to domestic non-telecom operator (the "domestic non-operator") customers and overseas customers. In the first half of 2023, revenue from domestic telecommunications operator customers accounted for 54.7% of total revenues, revenue from domestic non-operator customers accounted for 43.2% of total revenues and revenue from overseas customers accounted for 2.1% of total revenues.

While further developing domestic telecommunications operator market, the Group has also endeavored to expand the domestic non-telecom operator market. The Group proactively provides services, such as smart city solutions, municipal infrastructure, intelligence building and data center construction, to key customers such as government agencies and customers in the industries of construction, Internet & IT, transportation, electricity, etc.

Other than China, the Group's business also covers dozens of countries and regions globally, and its overseas customers are mainly located in the emerging markets including Southeast Asia, the Middle East and Africa. (Please refer to "Our Business" for more details)
What are the businesses under Telecommunications Infrastructure (TIS) Services of the Company?
The Group is the largest telecommunications infrastructure service group in the PRC, providing a full range of telecommunications infrastructure services to telecommunications operators in China and overseas. These services include planning, design, construction and project supervision for fixed line, mobile, broadband networks and supporting systems. The Group also provides construction services of ancillary communications networks, integrated solutions for informatization and intelligentization solutions of industries to domestic non-operator customers such as government agencies, industrial customers and SMEs, as well as overseas customers. (Please refer to "Our Business" for more details)
What are the businesses under Business Process Outsourcing (BPO) Services of the Company?
The Group is the largest integrated provider of business process outsourcing services in the communications industry in China. The Company can provide customers with all-round quality outsourcing services including management of infrastructure for information technology ("network maintenance"), general facilities management ("property management"), supply chain and products distribution services. The target of our services includes domestic and overseas telecommunications operator customers, government agencies and enterprises customers. The Group focused on OPEX-driven business of domestic telecommunications operators, and strengthened the synergistic operation and brand building of OPEX-driven business. (Please refer to "Our Business" for more details)
What are the businesses under Applications, Content and Other (ACO) Services of the Company?
The Group provides information system integration and project implementation, industrial digitalization application and solutions, proprietary software and platform product development, digitalization business and IT system support as well as value-added services to customers including domestic and overseas telecommunications operators, government agencies and enterprise customers. (Please refer to "Our Business" for more details)

 

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Last Updated: 21 September 2023

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