Performance review
First quarter 2022 results are in line with our expectations
The company announced its results for the first quarter of 2022: revenue of 22.633 billion yuan, an increase of 7.0% over the same period last year. EBITDA was 15.682 billion yuan, an increase of 0.8% over the same period last year; the net profit of returning to its mother was 2.18 billion yuan, an increase of 28.7% over the same period last year, which was in line with our expectations.
Trend of development
The business of operators is growing steadily. The company's 1Q22 operator business income increased 4.7% to 20.756 billion yuan over the same period last year, of which tower business income was 19.418 billion yuan, up 3.1% from the same period last year, and office business income was 1.338 billion yuan, up 35.7% from the same period last year. By the end of the first quarter of 2022, there were 2.045 million tower sites, an increase of 7000 over the end of 2021, and 3.493 million tower tenants, an increase of 34000 over the end of 2021. We believe that the operator 5G network construction will support the low-digit growth trend of the company's operator business, and the expansion of communication demand of downstream buildings, tunnels and other customers will lead to the steady growth of room business income.
The two wings business is developing rapidly, and the energy business is growing brightly. The company's 1Q22 business income totaled 1.828 billion yuan, an increase of 45.5% over the same period last year. Among them, Zhaopin business increased by 34.9% over the same period last year to 1.186 billion yuan. The company seized the development opportunity of "Digital China" and made use of the resource endowment of its iron tower sites all over the country to continue to build Zhaopin business and actively promote the transformation from "communication tower" to "digital tower". The company actively promotes the expansion of power exchange and backup business, and the 1Q22 energy business increased by 70.3% over the same period last year to 642 million yuan. The two-wing business accounted for 8.1% of revenue in the first quarter, an increase of 2.2ppt over the same period last year. We believe that the two-wing business will become an important growth driver for the company.
Fundamentals remained good, and EBITDA profit margins fell slightly in line with full-year expectations. The company's 1Q22EBITDA profit margin was 69.3%, down 4.2ppt from a year earlier, which we think may be due to the company's low depreciation and amortization expenses in the first quarter. Considering that the company's 1Q22 revenue and profit growth is good and the fundamentals are sound, we believe that the EBITDA rate will remain stable for the whole year.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 16.7 / 14.9 in 2023. Maintain an outperform industry rating and a target price of HK $1.20, corresponding to 21.8 times 2022 price-to-earnings ratio and 19.4 times 2023 price-to-earnings ratio, with 30.4% upside from the current share price.
Risk.
The promotion of 5G is not as expected, and the development of new business is not as expected.