In 2021, the net profit of homing increased by 14.0% over the same period last year, in line with market expectations. China Tower Corporation announced his performance in 2021: revenue rose 6.8% to 86.585 billion yuan, EBITDA increased 5.9% to 63.017 billion yuan, and EBITDA rate was 72.8%. Net profit increased 14.0% to 7.329 billion yuan, in line with market expectations. The dividend payout rate rose 2 percentage points year-on-year to 70%.
Trend of development
5G construction supports the steady growth of tower business, and co-construction and sharing is expected to improve profit margins. The company realized 75.857 billion yuan of tower business income in 2021, an increase of 3.4% over the same period last year. In 2021, the company completed about 552000 5G base stations. Driven by the continuous deepening of 5G co-construction and sharing, the sharing rate of tower tenants increased by 2.4% to 1.70 households per site compared with the same period last year. We expect that the continuous increase in the sharing rate of tower tenants will lead to a small increase in the company's profit margin and cost-effective completion of 5G coverage. In 2021, the revenue of office branch business increased by 23.0% to 4.34 billion yuan compared with the same period last year. We believe that the company will seize the favorable opportunity of extending 5G network coverage indoors to accelerate the expansion of room branch business.
The proportion of innovative business in the two wings has been increasing, and it has become a new momentum of growth. In 2021, the business revenue of the two wings increased by 55.6 per cent year-on-year to 6.131 billion yuan, accounting for an increase of 2.2ppt to 7.1 per cent of the revenue ratio. Among them, Zhaopin's business revenue increased by 35.2% to 4.06 billion yuan compared with the same period last year. We believe that the company is based on the advantages of resources and services, focusing on forestry, water conservancy, agriculture, environmental protection and other areas to speed up the transformation from "communication tower" to "digital tower". Energy business revenue increased by 121.5% to 2.071 billion yuan compared with the same period last year, and the company has become the largest light electric vehicle power exchange operator in the country, mainly due to the accelerated promotion of power exchange and backup business, relying on the advantages of site resources and professional power security capacity. We believe that the company will speed up the large-scale layout of Zhaopin's business and energy business, and the two-wing business will become an important momentum for the company's long-term development.
Profitability continues to improve and capital expenditure is lower than previous guidelines. In 2021, net profit increased by 14.0% to 7.329 billion yuan compared with the same period last year, and the net interest rate increased to 8.5%, mainly due to the effective reduction of financial costs brought about by the company's meticulous management and multiple financing channels. Capital expenditure in 2021 was 25.192 billion yuan, down 32.1% from the same period last year, which is about 84.0% of the guidance at the beginning of 2021, mainly due to reduced demand for 4G new construction by operators, slowing demand for 5G transformation, and the company's technological upgrading plan leading to a reduction in the cost of single-station transformation. We expect the company's capital expenditure to remain at about 30 billion yuan in 2022, of which about 16 billion yuan will be spent on 5G construction to ensure capital efficiency and development capacity in parallel.
Profit forecast and valuation
Taking into account the decline in demand for 4G construction by operators and changes in the construction structure of 5G, we have lowered our home net profit forecast by 2022 to 8.329 billion yuan. The income forecast of 2023 is 100.325 billion yuan for the first time, and the net profit forecast is 9.342 billion yuan. To maintain the company's outperform industry rating, the target price was lowered by 20.0% to HK $1.20, corresponding to 2.4x2022 EV/EBITDA in 23, and the current share price is 1.8 times EV/EBITDA in 2022max. The target price has 42.9% upside compared to the current share price.
Risk
5G promotion is slower than expected; new business development is slower than expected.