CHINA TOWER CORP(788.HK)：RESILIENT GROWTH WITH INCREASING SHAREHOLDER RETURN-格隆汇

机构：中银国际
研究员：Michael MENG/Constance ZHANG

　　China Tower reported 2H24 earnings up by 10% YoY on the back of operating revenue growth of 4.2% YoY, slightly missed our estimates. Given the resilient TSP businesses and rising contribution from Two Wings businesses, we expect company would continue to deliver quality growth, together with consistently increasing dividend payout. Improvement in return from their CAPEX will surely boost company’s long-term valuation. Reiterate BUY with new target price of HK$13.12 with revised 2025-26 earnings and share consolidation.
　　Key Factors for Rating
　　2024 earnings increased by 10% YoY to RMB10.7bn, slightly missed our estimates, on the back of 4.7% YoY EBITDA increase to RMB66.6bn; implying a NP growth of 10% YoY and EBITDA growth of 6.3% YoY in 2H24. Overall, we think company delivered a resilient result in 2024 with a consistently improving shareholder return of 76% dividend payout (vs. 75% in 2023) post share consolidation and capital reduction effective from 20 February 2025.
　　Operating revenue in 2024 grew 4% YoY, implying a growth of 4.2% YoY in 2H24, slightly missed our expectation. Revenues from TSP businesses remained resilient at a growth of 2.4% YoY in 2024; of this, Tower business grew 0.9% YoY and DAS business grew 18.1% YoY in 2024. Company remains dedicated to its “One Core and Two Wings” strategy, with Two Wings business revenue growing 16.4% YoY.
　　EBITDA margin improved by 0.5ppt YoY in 2024 (+1.4ppts YoY in 2H24), thanks to company’s disciplined control over maintenance expenses, though partially offset by rising personnel expenses.
　　CAPEX in 2024 increased by 0.7% YoY to RMB31.9bn, with IT support, Two Wings business, and new site expenditure growing 41.8%, 6.9%, and 5.4% YoY respectively while site replacement and improvement CAPEX dropped 19.9% YoY. For 2025, management expects similar trend for CAPEX allocation, and to maintain the same level of CAPEX.
　　Key Risks for Rating
　　Tower rental revenues contribute to the majority of company’s earnings, hence dependent on telco’s network expansion plan.
　　Valuation
　　We revised our 2025-26 estimated earnings by 0.6%-1.5% as we factor in disciplined cost control over its OPEX, hence delivering better earnings on the back of slight adjustment of revenues.
　　Reiterate BUY. Our DCF model suggested a fair value of HK$13.12/share based on our revised 2025-2026 earnings and share consolidation and reduction effective from 20 February 2025.