The company's 2022 half-year results are in line with our expectations
The company announced its results for the first half of 2022: the company's income in the first half of 2022 was 45.479 billion yuan, an increase of 6.6% over the same period last year; and the net profit returned to its mother was 4.224 billion yuan, an increase of 22.2% over the same period last year. In a single quarter, the company's 2Q22 revenue was 22.846 billion yuan, an increase of 6.2% over the same period last year, and its net profit was 2.044 billion yuan, an increase of 15.9% over the same period last year, which is in line with our expectations.
Trend of development
The expansion of room service coverage and the increase of tower sharing rate have promoted the steady growth of operators' business. The company's operator business revenue in the first half of 2022 increased by 3.9% year-on-year to 41.345 billion yuan. Where:
The coverage of office division business continues to expand, with an income of 2.753 billion yuan, an increase of 32.0% over the same period last year. Tower business revenue benefited from the steady growth of the sharing rate, up 2.3% from a year earlier to 38.592 billion yuan. The company actively promotes resource sharing. By the end of June 2022, the company had undertaken a total of 1.544 million 5G base stations, of which more than 97% were achieved through resource sharing, and the average number of tenants of operators' tower stations increased to 1.62 from 1.60 at the end of last year. We are optimistic that the company will expand its sub-business coverage, give full play to the advantages of existing site sharing, and promote the steady increase of operators' business income.
Focus on key industries, the two wings business to contribute strong momentum. The company's two-wing business accounted for 8.8% of total revenue in the first half of 2022, with an incremental contribution of 45.4% to revenue. Of this total, Zhaopin's business income was 2.584 billion yuan, an increase of 39.4% over the same period last year, mainly from key industries such as environmental protection and forest and grass. The income of the energy business was 1.426 billion yuan, an increase of 61.3% over the same period last year, mainly from the development of the power exchange business, which accounted for 56.2% of the energy revenue. Under the policy trend of Digital China and Beautiful Countryside, we believe that the company will continue to make efforts in key industries to promote the rapid development of business revenue.
The EBITDA rate is temporarily under pressure and is optimistic that the business development of the two wings will lead to a pick-up in long-term profit margins and maintain the CAPEX guidelines for the whole year. The company's EBITDA rate in the first half of 2022 was 70.3%, a year-on-year decline of 2.8ppt, which we believe is mainly due to: 1) the increase in investment in AI algorithm research and development and related expenses related to the marketing of new products; and 2) the increase in temporary maintenance costs caused by the expiration of the useful life of some fixed assets. We believe that with the expansion of the business scale of the two wings of the company, it will lead the company's EBITDA rate to pick up for a long time. In addition, due to the epidemic affecting the construction progress, the company's CAPEX fell 12.3% to 9.085 billion yuan in the first half of the year compared with the same period last year, but taking into account the improvement of the epidemic in the second half of the year and the operator's demand for 5G base station construction, we maintained the previous 2022 annual CAPEX guideline of 30 billion yuan.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 18.3 times 2023 / 16.3 times earnings for 2022 Universe. 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, which is 18.8% upside from the current share price.
Risk
The development of new business is not as expected, and the epidemic affects the construction progress of the tower site.