Performance review
The performance in 2021 was slightly lower than market expectations.
The company announced 2021 results: revenue of HK $33.961 billion, an increase of 4.9% year-on-year; EBITDA of HK $12.733 billion, up 1.6%; net profit of HK $4.808 billion, down 9.3% year on year; net profit of 2021 fell 2.7% after deducting the impact of non-recurring profits and losses in 2020. Due to the pressure on the cost side caused by the merger of the pay-TV business, the performance was slightly lower than market expectations.
Trend of development
5G penetration promotes the strong growth of mobile business revenue. Mobile business revenue in 2021 was 11.748 billion Hong Kong dollars, an increase of 13.3% over the same period last year. Government consumption vouchers pushed consumers to upgrade to 5G terminals, and revenue from mobile communications products rose 50.6 per cent year-on-year to HK $3.93 billion. In 2021, mobile users grew 4 per cent year-on-year to 4.77 million, of which 680000 were 5G users, with a penetration rate of 23 per cent among prepaid users. 5G led the mobile business to increase its post-paid ARPU by 2% compared with the same period last year, and the local mobile business revenue increased by 2% compared with the same period last year. However, due to the impact of the epidemic, tourism dragged down the roaming service revenue, and the overall mobile service revenue increased by 0.8% compared with the same period last year. We are optimistic that with the popularity of 5G terminals and the promotion of ARPU, mobile business revenue will grow steadily.
The digital transformation of enterprises and family diversity programs promote the development of broadband services. In 2021, telecommunications services revenue fell 2.4 per cent year-on-year to HK $21.812 billion, mainly due to pressure on the voice wholesale business, affecting international telephone service revenue fell 8.3 per cent year-on-year. Revenue from local data services grew 4.2 per cent year-on-year to HK $8.56 billion in 2021, while home-end FTTH, indoor WiFi solutions and enterprise-side digital transformation led to a 3.7 per cent year-on-year increase in broadband single-line revenue. We believe that the digital transformation of corporate customers will bring development opportunities for the company's telecommunications business.
Revenue from new business is eye-catching, and digitization contributes to long-term growth. In 2021, the company's pay TV revenue was HK $2.456 billion, of which Now E streaming service revenue increased by 56% year-on-year, and advertising revenue increased by 17%. In terms of new business, Club Shopping transaction volume rose more than 100 per cent year-on-year, driving revenue from other businesses to rise 139 per cent year-on-year to HK $872 million. We are optimistic about the development prospect of the pay TV business under the advantage of four networks in one, and diversify the new business to open up the growth space of the company.
Profit forecast and valuation
Taking into account the cost-side pressure caused by the merger of the Now TV business, we raised the 2022 revenue forecast by 3.8 per cent to HK $35.938 billion and lowered the 2022 forecast net profit by 13.2 per cent to HK $5.041 billion. We introduced the 2023 revenue forecast of HK $36.869 billion and profit forecast of HK $5.177 billion for the first time. The current share price corresponds to a price-to-earnings ratio of 16.2 / 15.7 times 2023. We believe that the company's mobile business is growing steadily, and the digital transformation can open up room for broadband and new business growth and maintain outperforming industry ratings and target prices of HK $14.00, corresponding to 21.0 times 2022 price-to-earnings ratio and 20.5 times 2023 price-to-earnings ratio. 30.1% upside compared to the current stock price.
Risk.
The development of the epidemic is uncertain; the development of new business is not as expected.