1Q24 revenue and net profit performance to mother are in line with our expectations
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 to mother are in line with our expectations.
Development trends
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 over year to 18.946 billion yuan; room division business revenue increased 19.8% year over 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. We believe that the number of China Tower sites has rebounded, mainly benefiting from operators' 5G construction needs. 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. We believe that the company will continue to promote site tenant sharing, taking into account the year-on-year factors of the number of sites. We believe 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 1Q24 revenue of the company's Zhilian business increased 21.0% year-on-year to 1,974 billion yuan; the 1Q24 revenue of the energy business increased 0.8% year-on-year to 957 million yuan, and the growth rate of energy business revenue slowed down. We expect this is mainly due to the company's stricter requirements for project profit margins.
EBITDA grew steadily, and the decline in the depreciation ratio supported the improvement in net profit margin. The 1Q24 company'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. We think it may be due to the increase in expenses related to business development on both sides. In 1Q24, the company's net profit margin increased by 0.8ppt to 11.6% year on year. We believe that it is mainly due to the decline in the company's depreciation ratio, which supports profit performance. Looking ahead to the whole year, we believe that the company's net profit margin in 2024 is expected to increase further compared to 2023.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains largely unchanged. The current stock price corresponds to 2.9 times EV/EBITDA in 2024 and 2.6 times EV/EBITDA in 2025. Maintaining an outperforming industry rating and a target price of HK$1.20, corresponding to 3.5 times 2024 EV/EBITDA and 3.2 times 2025 EV/EBITDA, with 36.4% upside compared to the current stock price.
risks
Cash flow recovery from operating activities fell short of expectations; market concerns about commercial pricing agreements intensified.