The Zhitong Finance App learned that CICC released a research report saying that maintaining China Tower (00788)'s “outperforming the industry” rating, the profit forecast for 2024 and 2025 remains basically unchanged, with a target price of HK$1.2. The company announced results for the first quarter of 2024: revenue of 23.974 billion yuan, up 3.3% year on year; net profit to mother of 2,784 billion yuan, up 11.1% year on year. Revenue and net profit performance accruing to mother are in line with this forecast.

The main views of CICC are as follows:

The operator business continues to develop steadily.

1Q24's operator business revenue was 20.984 billion yuan, an increase of 2.2% over the previous year. Among them: Tower business revenue increased 0.6% year on year to 18.946 billion yuan; room division business revenue increased 19.8% year on year to 2,038 billion yuan. By the end of March 2024, the number of the company's tower sites reached 2,059 million, an increase of 13,000 over the end of 23. The bank believes that mainly benefiting from operators' 5G construction needs, the number of China Tower sites has rebounded. By the end of 1Q24, the number of tower tenants reached 3.701 million, a net increase of 43,000; the average number of tenants at tower stations was 1.80, an increase of 0.04 over the same period last year. The bank believes that the company continues to promote site tenant sharing, taking into account the year-on-year factors of the number of sites. The bank believes that the 2H24 tower business revenue growth rate may be higher than 1H24.

The smart link business continues to maintain good revenue growth, and the energy business revenue growth rate is slowing down.

The 1Q24 two-wing business continued to grow steadily. Overall revenue increased 13.6% year over year, accounting for 12.2% of revenue, up 1.1 ppt year on year. Among them, the company's Zhilian business 1Q24 revenue increased 21.0% year on year to 1,974 billion yuan; energy business 1Q24 revenue increased 0.8% year on year to 957 million yuan, and the energy business revenue growth rate slowed down. The bank's forecast is mainly due to the company's stricter project profit margin requirements.

EBITDA grew steadily, and the decline in the depreciation ratio supported the improvement in net profit margin.

1Q24's EBITDA increased 3.0% year on year to 16.597 billion yuan. The EBITDA rate was 69.2%, down 0.3 ppt year on year. The bank believes this may be due to the increase in expenses related to business development on both sides. The net profit margin of 1q24 increased by 0.8 ppt to 11.6% year on year. The bank believes that it is mainly due to the decline in the company's depreciation ratio, which supports profit performance. Looking ahead to the whole year, the bank believes that the company's net profit margin in 2024 is expected to increase further compared to 2023.

risks

Cash flow recovery from operating activities fell short of expectations; market concerns about commercial pricing agreements intensified.