Earnings First Take: Net loss of HK$96m in 1H22, below market expectations
- Local service revenue decreased by 6% y-o-y due to impact from fifth wave of COVID-19 in 1H22
- Service EBITDA decreased by 6% y-o-y to HK$678m, with service EBITDA margin flat y-o-y
- 1H22 turned into net loss of HK$96m, below market expectations; no special interim dividend was declared
- Expect negative share price reaction
– Hutchison (HT, 215 HK) announced the 1H22 results on 29 Jul 2022 after market close.
– Revenue decreased by 10% y-o-y to HK$2,298m. Hardware and other products sales declined 21% y-o-y to HK$740m due to supply chain constraints and strong sales in 1H21 from deferred launch of new smartphones in 2020.
– Service revenue decreased by 4% y-o-y to HK$1,558m and local service revenue dropped by 6% y-o-y to HK$1,418m, due to intense competition and the slowdown of corporate solution revenue during the fifth-wave of COVID-19 in Hong Kong. Roaming revenue slightly recovered 10% y-o-y to HK$140m, accounting for c.9% of service revenue.
– EBITDA decreased by 7% y-o-y to HK$695m. Service EBITDA dropped by 6% y-o-y to HK$678m due to increasing network operating costs and lower service revenue decline. Service EBITDA margin remained flat at 44% y-o-y.
– Net loss was HK$96m in 1H22 compared to a net profit of HK$31m in 1H21, below market expectations.
– An interim dividend of HK$0.0228 per share were proposed, same as last year. No special dividend was declared, compared to HK$0.198 per share in 1H21.
– Expect negative share price reaction due to earnings deterioration in 1H22 and no special dividend declared.
– Expect local service revenue to recover in 2H22 with the resumption of economic activities from gradual easing of COVID-19 measures in Hong Kong.
– We currently rate HOLD on the counter; TP of HK$1.1.