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What was the latest operating performance of the Company?
In 2023, the Chinese government accelerated the construction of Digital China and new industrialization, leading to the deepening of a new round of scientific and technological revolution and industrial revolution as well as the continuous acceleration in the pace of digitalization and intelligentization. By positioning itself as a “New Generation Integrated Smart Service Provider” and led by technological innovation, the Group deeply explored strategic emerging industries and built core capabilities to improve the quality of corporate development, thus achieving favorable operating performance and efficiency in development.

By adhering to its overall roadmap of “value-driven, seeking steady yet progressive growth and high-quality development” and giving full play to its advantages as “Builder of Digital Infrastructure”, “Provider of Smart Products and Platforms”, “Provider of Industrial Digitalization Services”, and “Guard of Smart Operation”(“Four Roles”), the Group accelerated the expansion into the strategic emerging industries, and continued to improve its operating results, with steady and healthy growth in total revenues and net profit. During the year, the Group’s total revenues reached RMB148,615 million, representing a year-on-year increase of 5.6%, among which, service revenue amounted to RMB143,437 million, representing a year-on-year increase of 6.1%. Gross profit amounted to RMB17,257 million, representing a year-on-year increase of 8.0%, and gross profit margin improved for two consecutive years to 11.6%, representing a year-on-year increase of 0.2 percentage point. Net profit was RMB3,584 million, representing a year-on-year increase of 6.7%, and such growth rate continued to be higher than the revenue growth rate. Net profit margin was 2.4%, which stabilized and improved. Free cash flow was RMB4,333 million, which remained healthy. Return on equity (ROE) was 8.6%, representing a year-on-year increase of 0.1 percentage point. . Basic earnings per share were RMB0.518, representing a year-on-year increase of 6.7%.
Why has the Company's gross profit margin increased for two consecutive years? And what would be the trend going forward?
In 2023, the Group recorded gross profit of RMB17,257 million, representing an increase of 8.0% over RMB15,982 million in 2022. The Group’s gross profit margin in 2023 was 11.6%, representing an increase of 0.2 percentage point from 11.4% in 2022, and the gross profit margin has continued to rebound steadily. During the year, while catering for the scale of its development, the Group focused more on improving quality and efficiency, and guided its subsidiaries through appraisal to strictly select and develop high-margin projects. At the same time, the Group continuously strengthened project management and cost control, enhanced technological innovation to drive business development and strove 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 and industrial digitalization areas, it is expected that the proportion of high-value businesses will gradually increase and thereby driving the trend of the Group’s overall gross profit margin to improve.
What were the major measures that the Company implemented to reduce the cost and improve the efficiency?
In 2023, the Group carried out a number of measures to strictly control the costs and expenses, and implemented various work to improve the quality and efficiency, and achieved favorable results. The cost of the revenues accounted for 88.4% of the total revenues in 2023, representing a decrease from 88.6% in 2022.

Among which, direct personnel costs accounted for 5.8% of our total revenues, representing a decrease of 0.3 percentage point from 2022. The Group kept a reasonable control over its total headcount and continued to optimize the employee structure, which resulted in the continuous decrease of the proportion of direct personnel costs to total revenues.

Materials costs accounted for 16.6% of our total revenues, representing an increase of 1.2 percentage points from 2022. The increase was because the Group optimized its business model and undertook major projects in general contracting model proactively. In addition, the fast development of system integration business, which involved relatively more materials, also drove up materials costs. The Group will continue to strengthen the management of general contracting projects and enhance materials cost control by improving its internal procurement system and further implementing centralized procurement.

Subcontracting charges accounted for 54.0% of our total revenues, representing a decrease of 0.4 percentage point from 2022. By strengthening the full-process management of subcontracting continuously, enhancing the management and supervision through systems, technologies and personnel, as well as improving the self-sufficient delivery capability, the Group effectively controlled the subcontracting costs, with the proportion of subcontracting costs to total revenues declined and the growth rate of subcontracting costs being lower than the growth rate of total revenues by 0.8 percentage point. The Group will continue to strengthen and regulate the management over subcontracting, with a view to maintaining the growth of subcontracting charges at a relatively reasonable level.

For the selling, general and administrative (SG&A) expenses, the Group continued to increase the investment in research and development (R&D), and R&D expenses as a percentage of total revenues increased 0.2 percentage point to 3.7%. Excluding R&D expenses, SG&A expenses as a percentage of total revenues declined 0.1 percentage point to 6.3%, which continued to be under good control.
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?
With a focus on the needs for digitalization, intelligentization and green development of the society and leveraging its advantages of “Consultant + Staff + Housekeeper” services and “Platform + Software + Service” capabilities, the Group provided customized and scenario-based solutions to customers in the government, energy and power, construction, transportation and other industries. The standard of its service and the quality of its delivered work have been continuously improved, and the business value of such customer market has steadily increased. Revenue from such market during the year amounted to RMB63,433 million, representing a year-on-year increase of 6.3%, becoming the main engine leading the overall revenue growth. The Group focused on strategic emerging industries such as digital infrastructure, smart city, green and low-carbon, emergency management and security, etc. Through continuously forging core capabilities and platforms as well as leveraging the advantage of integrated service capabilities, the Group strove to expand high-value businesses, thus achieving high-quality business development and continuous optimization of revenue mix in domestic non-operator market.

The Group quickly responded to customer needs and provided a comprehensive smart product portfolio that could be disassembled or combined, as well as full-process service from top-level design to product R&D and operation. In 2023, the Group seized the development opportunities of strategic emerging businesses, and accelerated its deployment in strategic emerging industries, such as digital infrastructure, smart city, green and low-carbon, emergency management and security. For digital infrastructure, the Group grasped the demand for large models and cloud computing, focusing on intelligent computing, supercomputing and cloud business. Leveraging its high-end consulting and design capabilities as the lead and the application of BIM digitalization technology, the Group provided 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. The Group actively served the national “East Data, West Computing” projects, and participated extensively in the construction of national integrated big data centers for the “eight national computing hubs and ten national data center clusters”.

In the fields of smart city and digital government, the Group focused on the new urbanization construction and urban renewal, the revitalization of old town neighbourhood and community development, and important needs of smart transportation, safe cities, smart government affairs, 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, the Group seized the market opportunities of new energy construction and energy usage services, and offered integrated AI energy-saving and carbon reduction service for new green and low-carbon data centers, as well as providing new energy solutions including photovoltaic energy, wind power and hydropower to different types of customers. Besides, it engaged in platform development and services such as “Dual Carbon” management cloud platform, energy consumption monitoring management platform and carbon asset digitalization management platform. It also offered energy management, production and manufacturing equipment disposal management. As for emergency management, with the main business line of eight major industries including emergency management, fire-fighting, ecological environment, water conservancy, meteorology, natural resources, forestry and grassland, and civil air defense, the Group developed more than 40 industry and equipment application products to provide governments, chemical industry parks, and highly hazardous customers with consultation and design, software development, system integration and operation and maintenance services. Regarding cybersecurity, to cater for customers’ needs for operational compliance, digitalization development and operational practices, the Group provided them with security products in the fields of cybersecurity, data security, and information security, security consultation and design, security integration, project implementation, special security services, security supervision and other services.
What strategy did the Company adopt to achieve stable revenue growth in the domestic telecommunications operator market as investment in 5G network by domestic telecommunications operators has peaked?
By persisting in the “CAPEX + OPEX + Smart Applications” development strategy, while improving the operational efficiency of its traditional businesses, the Group focused on the new needs of domestic telecommunications operators in respect of the computing power construction, industrial digitalization business and technological innovation transformation. The Group gave full play to its general contracting capabilities as well as integrated advantages, and continued to build up its service capabilities in delivery, operational support and software development, fully supporting the operators’ business transformation and upgrading, and undertaking multiple benchmark projects in cloud, intelligent computing centers, “Dual Carbon”, thereby realizing win-win cooperation.

In 2023, the Group grasped opportunities in AI computing power construction, industrial digitalization, 5G+ and new infrastructure construction, with a view to penetrating traditional CAPEX businesses. The Group explored the market potential of network maintenance, property management and supply chain services, and strived to increase the OPEX market share. It fully supported operators’ demand for industrial digitalization in the course of transformation by proactively engaging in the market expansion of 5G industrial applications, industrial digitalization and network information security, and it assisted operators to achieve green development by supporting “zero carbon” data center construction, green retrofit of old machine rooms, and “Dual Carbon” energy-saving platform construction, which ultimately stabilized the fundamentals of business from the domestic telecommunications operators. The revenue from this market amounted to RMB81,726 million for the year, representing a year-on-year increase of 4.7%. Of which, ACO business achieved rapid growth, increased 20.7% year-on-year, remained as the major growth driver of the market.
How was the Company's development in overseas market? And what is the Company's outlook in the development of the overseas market?
In 2023, the Group proactively integrated itself into the new development paradigm of “dual-circulation with domestic and international development reinforcing each other” and seized the important opportunities in the “Belt and Road” and digital economy construction. The Group continuously optimized overseas market deployment and focused on key regions such as Asia Pacific, the Middle East, Africa and Latin America. Targeting telecommunications operators, energy and electricity customers, overseas governments and enterprises, and “Go Abroad” Chinese companies, the Group focused on four businesses namely digital infrastructure construction, “Dual Carbon” services, smart government services and industrial informatization services. On the basis of safety development at a high standard, the Group accelerated transformation and upgrading, promoted capability improvement and diversification of business structure, thus brought along high-quality development of overseas business. The revenue from overseas customers amounted to RMB3,456 million, representing a year-on-year increase of 15.3%.

The Group will further seize the global post-pandemic development opportunities in overseas market, penetrate key regions, customers and businesses. We will coordinate our development with safety, further enhance marketing, project management, ecological collaboration, risk management and control with a view to achieving safe and effective development.
What were the Company's performance in businesses of TIS, BPO and ACO?
In 2023, revenue from the Group’s telecommunications infrastructure (“TIS”) services amounted to RMB76,137 million, representing a year-on-year increase of 4.4%, accounting for 51.2% of total revenues. Among them, the high-value consultation and design businesses achieved favorable development, which effectively improved the profitability of the TIS segment. Revenue from business process outsourcing (“BPO”) services amounted to RMB43,551 million, representing a year-on-year increase of 1.1%, accounting for 29.3% of total revenues. Benefiting from the Group’s advantages in software and digital services capabilities, revenue from applications, content, and other (“ACO”) services maintained a relatively rapid growth, and amounted to RMB28,927 million, representing a year-on-year increase of 16.8%, accounting for 19.5% of total revenues, which was the leading contributor to the Group’s revenue growth. Among them, revenue from software development and system support maintained a rapid growth of 25.1% year-on-year.

During the year, by seizing the opportunities arising from 5G, new infrastructure and industrial digitalization and consistently improving its integrated comprehensive smart service capabilities, the Group supported the construction of domestic computing power and 5G network, and at the same time, continuously made breakthroughs in strategic emerging industries such as digital infrastructure, smart city, green and low-carbon, emergency management and security, thus maintaining the steady growth of the TIS services. The Group further consolidated its resources and promoted specialized operations, resulting in a continuous stable growth in BPO services that possess attributes such as strong customer loyalty and short cash conversion cycle. Meanwhile, the Group continuously strengthened its technological innovation, consolidated the capabilities on its research and development as well as product development, and seized informatization construction opportunities arising from smart city upgrade, digital transformation of enterprises and emergency management, etc. These efforts stimulated the development of its businesses such as system integration and software development, making the ACO services continue to be the business segment with the fastest-growing revenue.
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?
By adhering to its overall roadmap of “value-driven, seeking steady yet progressive growth and high-quality development” and giving full play to its advantages as “Builder of Digital Infrastructure”, “Provider of Smart Products and Platforms”, “Provider of Industrial Digitalization Services”, and “Guard of Smart Operation” (“Four Roles”), the Group accelerated the expansion into the strategic emerging industries. In 2023, the construction of Digital China entered a new stage of overall deployment and comprehensive advancement. The Group continued to further its efforts in strategic emerging industries such as digital infrastructure, smart city, green and low-carbon, and emergency management and security, and built up new momentum and new edges. During the year, the aggregate value of the new contracts from strategic emerging businesses increased by more than 30% year-on-year, accounting for nearly 30% of the total new contracts value, representing an increase of approximately 5 percentage points from last year, which effectively drove the transformation and upgrading of the overall business and promoted high-quality development of the Company.

In the field of digital infrastructure, the Group actively engaged in the construction of intelligent computing centers, supercomputing centers and the transformation and upgrading of data centers, and strengthened a series of cloud businesses such as cloud consultation, cloud migration, cloud integration, and cloud operation and maintenance. With its profound accumulation of industry experience, the Group integrated the new generation of digital intelligence and green technology to develop a unique “1+2” digital new infrastructure solution (i.e. providing whole-process and full-profession integrated services which are marked by the two major technological features of green and low-carbon as well as digital intelligence). The Group led the industry with its energy-saving technology for data center and full-process digital delivery capability. The Group successfully undertook multiple projects of data centers in the “eight national computing hubs” among the “East Data, West Computing” projects in China and overseas. The value of the new contracts from such field grew by approximately 30% during the year. The Group also released the “White Paper on China’s Data Center Industry Development (2023)” and contributed its expertise and strength to the building of a solid foundation for digital infrastructure.

In the field of smart city, as the sub-sectors among social governance developed and the entire industry accelerated digital transformation, the Group continued to focus on areas such as digital government, smart park, smart transportation, smart education, smart healthcare and enterprise digital transformation. The Group continued to strengthen its marketing team, improved service quality, gave full play to the integrated advantages of consultation and design leadership, software development support and general contracting delivery. Leveraging its three-tier service capabilities covering provinces, cities and counties across the country, the Group integrated the development of key industries and core regions, enabling it to successfully secure several EPC general contracting projects with contract value of over RMB100 million each. The value of the new contracts from such field grew by more than 20% during the year.

In the field of green and low-carbon, the Group supported the comprehensive green transformation of economic and social development. Capturing the demand for investment in new digital power systems and exploring new area for deployment in carbon assets, the Group focused on major businesses such as electricity infrastructure and ancillary facilities, photovoltaic construction, energy usage services and carbon management, promoting the research and development and application of key technologies in low-carbon, zero-carbon and negative-carbon. The Group developed a whole-process green and low-carbon solution of “Driving Development with Consultation + Digital Empowerment + Product Innovation + Engineering Construction + Operation and Maintenance”, which has solidified its core competitiveness and differentiated advantages in the field. The value of the new contracts from such field grew by more than 50% during the year.

In the field of emergency management and security, the Group is committed to promoting the construction of social public safety systems. By closely following customers’ needs for safe operations and data security, the Group utilized technologies such as artificial intelligence, big data, 5G, Internet of Things, and developed products such as comprehensive application platform for emergency management, production safety risk monitoring and early warning system, emergency command information system, cyberspace surveying and mapping and data security monitoring. These products enabled sensitive awareness, accurate prediction, timely response and scientific decision-making for major risks, provided high-quality industry planning and top-level design services, and guarded urban public safety, industrial production safety and natural ecological safety. The value of the new contracts from such field achieved steady growth during the year. The Group had leading capabilities in smart application services and platform construction in this field and was successfully selected into the “Smart Safety and Emergency Industry Map”.
Which areas did the Company invest research and development in? What were the results?
By positioning itself as a “New Generation Integrated Smart Service Provider” and led by technological innovation, the Group deeply explored strategic emerging industries and built core capabilities to improve the quality of corporate development, thus achieving favorable operating performance and efficiency in development.

The Group consistently advances on research and development. Focusing on “1 Positioning, 4 Roles” in key technology applications and innovation, it further increased research and development investment, with an investment amount of over RMB5.5 billion in 2023, representing a year-on-year growth of approximately 12%, which has maintained double-digit growth for three consecutive years. The Group managed relevant resources in a centralised manner to refine technological innovation management through three core functions, which were the research strategy management, research project management and research management. Special emphasis was put on the deployment of re integrated search in four major aspects, namely leading technology, industrial digitalization, network information security and emergency management and the digitalization middle platform. Currently, the Group has around 20 product research and development centers and has developed over 30 industrial application products, covering various industries and sectors such as smart city, digital government, cybersecurity, industrial Internet, smart sport, smart education 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. In 2023, the revenue from software development and system support recorded a year-on-year growth of over 25%.

The Group insisted on driving “intrinsic” growth through technological innovation. It increased investment in research and development on strategic emerging businesses, and closely followed customers’ needs to carry out application technology innovation, and accelerated the research and development and operation of core products. The Group strengthened overall planning for technological innovation and arranged in advance the deployment in cutting-edge technology fields such as 6G, data centers, computing power, blockchain, and artificial intelligence. The Group compiled a total of 16 national standards during the year and accumulated more than 3,000 authorized patents. The Group has ranked fourth in the “100 Most Competitive Software & IT Service Enterprises” for three consecutive years, also being selected in the “Smart Safety and Emergency Industry Map” by the China Academy of Information and Communications Technology and “China Cybersecurity Industry Panorama” by AQNIU. It won a total of 49 major awards for scientific and technological achievements during the year, indicating that its innovation capabilities and scientific and technological strength have been widely recognized by the society.
What measures did the Company implement to maintain the free cash flow at a relatively healthy level? And what would be the trend going forward?
In 2023, the economic recovery was in progress and some customers faced strained conditions in funding, which brought challenges to our working capital management. The Group actively responded to the challenges by taking multiple measures to strengthen the management over accounts receivables, such as strengthening appraisal assessment and utilizing IT measures. Besides, the Group actively fulfilled its social responsibility by making payments in strict accordance with the terms of contracts. During the year, free cash flow amounted to RMB4,333 million with cash conversion ratio of 149.4%, indicating the Group’s cash flow remained at a healthy level. The Group will adhere to the philosophy of “Revenue with Reasonable Profit, Profit with Matched Cash Flow” and strive to maintain cash flow at a reasonable and healthy level.
What was the dividend paid by the Company? What's the dividend policy of the Company?
The Group persists in the dividend policy of “Continuous Growth, Steady Enhancement”, and it has been increasing dividend year over year in the past decade. Considering the sound operating results and cash flow for the full year, and to further increase shareholders’ return, the Board has proposed to increase the dividend payout ratio from 40% in 2022 to 42% for the financial year ended 31 December 2023, and pay a final dividend of RMB0.2174 per share, representing a year-on-year increase of 12.1%. 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 positions itself as a “New Generation Integrated Smart Service Provider”, leverages its strength as “Builder of Digital Infrastructure”, “Provider of Smart Products and Platforms”, “Provider of Industrial Digitalization Services”, “Guard of Smart Operation” (“1 Positioning, 4 Roles”), the Group 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 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 2023, revenue from domestic telecommunications operator customers accounted for 55.0% of total revenues, revenue from domestic non-operator customers accounted for 42.7% of total revenues and revenue from overseas customers accounted for 2.3% 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 Asia Pacific, 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: 14 May 2024

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