Earnings First Take: 1Q22 EBITDA increased by 0.8% y-o-y, below market expectations
- EBITDA increased by 0.8% y-o-y to Rmb15.7bn in 1Q22, lower than market expectations due to margin contraction
- Operating revenue increased by 7% y-o-y to Rmb22.6bn in 1Q22, with TSP and Two Wings business grew by 4.7% and 45.5% y-o-y respectively
- Net profit increased by 28.7% y-o-y to Rmb2.2bn in 1Q22
- Expect negative share price reaction
What’s New
– China Tower (788 HK) announced its 1Q22 results on 19 Apr 2022 after market close.
– Operating revenue grew by 7% y-o-y to Rmb22.6bn in 1Q22, driven by 4.7% increase in TSP business and 45.5% increase in Two Wings (Smart Tower and Energy) business.
– Tower sites increased by 7k from 2,038k to 2,045k and total number of tower tenants increased by 34k from 3,459k to 3,493k, with tower tenancy ratio increasing from 1.70x to 1.71x, compared to the end of Dec 2021.
– EBITDA increased by 0.8% y-o-y to Rmb15.7bn in 1Q22, with EBITDA margin contracting 4.2ppts to 69.3%.
– Net profit increased by 28.7% y-o-y to Rmb2.2bn in 1Q22.
Our View:
– We expect negative share price reaction as 1Q22 EBITDA growth is below full-year market expectations of 5-6% for FY22.
– Two Wings business expanded rapidly by 45.5% y-o-y in 1Q22, lifting revenue contribution of non-tower business from 10.9% in 1Q21 to 14.2% in 1Q22.
– We currently rate BUY on the counter; TP of HK$1.25.