The company's 2022 1-3Q performance is in line with our expectations.
The company announced its results for the first three quarters of 2022: revenue of 68.682 billion yuan, an increase of 6.3% over the same period last year, and net profit of 6.399 billion yuan, an increase of 21.7% over the same period last year, in line with our expectations. In a single quarter, the company's 3Q22 revenue was 23.203 billion yuan, an increase of 5.9% over the same period last year, and its net profit was 2.175 billion yuan, an increase of 20.9% over the same period last year.
Trend of development
Operator business continues to maintain steady development. The business revenue of operators was 62.187 billion yuan, an increase of 3.4% over the same period last year. Among them, the revenue of tower business increased by 1.8% to 57.953 billion yuan compared with the same period last year, while the revenue of room business grew well, up 32.6% to 4.234 billion yuan over the same period last year. As of September 30, 2022, the number of tower sites of the company has reached 2.052 million, the number of tower tenants is 3.535 million, and the average number of tower station tenants has been further increased to 1.72. We believe that the company's operator business benefits from the orderly promotion of 5G construction and co-construction and sharing, and will continue to maintain steady growth.
The two wings business continued to maintain rapid growth, business transformation and depreciation decline led to the improvement of the company's profit margin.
The company actively promotes the development of the two-wing business, of which Zhaopin's business revenue increased by 41.4% year-on-year to 4.012 billion yuan, energy business revenue increased by 59.9% to 2.303 billion yuan, and the proportion of the two-wing business in revenue increased to 9.2% from 6.6% in the same period last year. In the first three quarters of 2022, the company's EBITDA grew 0.4% year-on-year to 47.46 billion yuan, EBITDA rate decreased 4.1ppt to 69.1% year-on-year; net profit margin was 9.3%, an increase in 1.2ppt. We believe that the fluctuation of the company's EBITDA rate is mainly due to the decline in depreciation, and the company's business transformation has effectively led to an increase in net profit margin.
As the five-year business pricing agreement is about to expire, it is recommended to pay attention to the progress of the renewal of the 4Q22 agreement. The Commercial pricing Agreement and supplementary agreements signed between China Tower Corporation and the three major operators in 2016 and 2018 will expire at the end of 2022, and we think the company will announce the signing of the follow-up agreement at 4Q22. The agreement will determine the pricing and preferential policies for the company to sell tower products to the three major operators, which will have a great impact on the revenue of the company's operators' tower business, so it is recommended to pay attention to the follow-up progress.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current stock price corresponds to 2.8x / 2.4x EV/EBITDA in 2023. Taking into account the sound development of the company's operator business, the continued high growth of the two wings' business growth, and the good performance of the fundamentals, we maintain an outperform industry rating and a target price of HK $1.20, corresponding to 3.5 times 2022 EV/EBITDA and 3.1 times 2023 EV/EBITDA, which has 46.3% upside compared with the current stock price.
Risk.
The promotion of 5G is not as expected, and the development of new business is not as expected.