Event: the company released 2Q22 results, with revenue of 22.85 billion yuan, an increase of 6.2% over the same period last year and 0.9% month-on-month growth. Among them, the revenue of the core tower business reached 19.2 billion yuan, an increase of 1.5% over the same period last year; the revenue of the room business reached 1.4 billion yuan, an increase of 29% over the same period last year; and the two-wing business maintained rapid growth, up 47% from the same period last year. EBITDA profit margin was 71.2 per cent, down 1.4 per cent from a year earlier, mainly due to increased maintenance costs to strengthen asset operations, as well as increased R & D and sales expenses related to the two-wing business, corresponding to a 4.1 per cent year-on-year increase in EBITDA profits. The net profit was 2.04 billion yuan, up 16% from the same period last year.
Driven by tower business and office division business, operator business is expected to continue a steady growth trend in the past 22 years: 1H22's tower business revenue increased by 2.3% compared with 3.7% of 1H21, mainly due to the decrease in the number of new tenants in the middle and later stages of 5G construction, and the current demand for new tenants is mainly met by the sharing transformation of storage towers, corresponding to a reduction in the number of new sites. On the other hand, the average number of rented households of operators' tower stations has increased to 1.62 from 1.60 at the end of 2021. However, taking into account the continued construction of 5G and the weakening of the factors affected by the epidemic in the second half of the year, we expect tower business revenue to grow by about 3% in 22 years. 1H22 room business increased 32% year-on-year, mainly due to the increase in the permeability of 5G room sub-projects, 1H22 building room coverage increased by 35.4% year-on-year, and the total mileage of high-speed rail tunnel and subway coverage increased by 26.6% year-on-year. We believe that the increased demand for room division construction will promote the rapid growth of room division business, and the annual growth rate is expected to be more than 30%.
Benefiting from the digital economy and the "double carbon" strategic goal, the company's two wings have a good trend of rapid growth: the combined revenue of the 1H22 business Zhaopin and the energy business increased by 47 per cent year-on-year, and the share of revenue expanded to 8.8 per cent.
Benefiting from the development of the digital economy, Zhaopin's business grew by 39% compared with the same period last year. The company focused on environmental protection, forest and grass, agriculture, land and other key industries to meet customer needs. The company's energy business provided four-in-one comprehensive services such as power preparation, power generation, monitoring and maintenance. 1H22 revenue increased by 61% compared with the same period last year. The company continues to increase investment in its two-wing business, which is expected to maintain rapid growth, and we expect annual revenue growth of about 40% in 22 years.
Profit forecast, valuation and rating: based on the increase in the company's maintenance costs, the EBITDA profit forecast for 22-23 is reduced by 3% to 662 / 70 billion yuan, and the 2024 EBITDA profit forecast is increased by 74.1 billion yuan, corresponding to a year-on-year growth rate of 5.0%, 5.8% and 5.8%, respectively. Maintain the target price of HK $1.25 and maintain the "overweight" rating. The opportunity for future valuation increase will mainly come from two aspects: 1) the current share price of HK $1.01 corresponds to a dividend yield of 3.6%, 4.3% and 4.8% respectively for 22-24 years, and the company's net profit is expected to maintain rapid growth and drive dividend yield to become more attractive. 2) in 22 years, the company will enter the renegotiation stage of the business pricing contract with the operator. If the higher-than-expected bargaining power of the Hongzhang business leads to a clearer medium-and long-term fundamentals, it will help to improve its valuation.
Risk tips: adjustment of pricing agreement; slowdown of room division and cross-industry expansion.