Investment Summary

CHINA TOWER（the “Company”）announces certain selected unaudited consolidated key financial and operating data of the Company for the period ended 30 September 2020. Operating revenue was 60,220 million (RMB, the same below) up by 5.6% yearly, EBITA was 44.019 million up 5.4% yearly, net profit attributable to owners of the Company was 4,564 million up by 17.8% yearly.

Steady growth in tower business

In the first three quarters of 2020, revenue from tower business was 54,798 million, up by 2.2% yearly. Revenue from Tower business in Q3 was 18,427 million, up by 3.4% yearly and 1% quarterly. As of the end of September, the Company managed a total of 2,020 thousand tower sites, net increase 5,000 quarterly, and representing a net increase of 26,000 compared to the end of last year. Tower tenants reached 3,336 thousand, representing a net increase of 23,000 quarterly, and a net increase of 97,000 compared to the end of last year. We believe that the growth of tower revenue in the third quarter is in line with our expectation, mainly because more 5G base stations are built and the impact of “COVID-19” has reduced. We expect that as more traditional power grids are upgraded to 5G smart grids, more tenants will gradually lease 5G base stations. We expect the tower business in Q4 will continue to grow by 1% quarterly, and the yearly growth rate of full year tower business revenue will reach 2.85%.

Non-tower business maintained high growth

In the first three quarters of 2020, revenue from DAS business was 2,634 million, up by 36.9% yearly。Revenue from DAS business in Q3 was 914 million，up by 36.42% yearly and 1.44% quarterly。The growth was below our expectation，mainly because the DAS market(such as subways, large venues, high-end commercial buildings and government offices) couldn`t expand as expected. We expect revenue from DAS business in Q4 will increase 1.5% quarterly, full year revenue from DAS business up by 34% yearly. Revenue from TSSAI business and energy operation for the first three quarters of 2020 was 2,612 million，up by 92.8% yearly。Revenue from TSSAI business and energy operation in Q3 was 1,030 million，up by101.76% yearly and 15.16% quarterly，the growth exceeds our expectation. We expect revenue from TSSAI business and energy operation in Q4 would increase 10.94% quarterly, Full year revenue from TSSAI business and energy operation would increase 80.6% yearly. The revenue from non-tower business accounted for 9.0% of total operating revenue for the period, increasing from 6.0% for the same period last year. We expect this would continue in the future.

Valuation and Investment Recommendation

To conclude, although the growth in DAS business was below our expectation, the overall business is growing steadily. The Company`s valuation is currently at the bottom range based on historical record, there is little risk of further drop in current price. We expect the Company`s net book value per share to be RMB1.06/1.13/1.21 for 2020/2021/2022, giving a 12-month target price of HK1.54, corresponding to the P/B of 1.28x/1.20x/1.12x. Accumulate rating is maintained.

Risks

1) COVID-19 outbreak in China

2) Development of 5G was not as expected

3) The number of tenants grow slower than expected

Financial statements

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