Overvalued communication tower infrastructure service provider

ChinaTower (788.HK) 3 th Jan 219 Target Price(HKD) 1.36 29 th Jan 219 1.67 Close Price 1.67 HSI 2762.85 52-Week Range.99/1.76 Market Cap(HKDm) 293,93 3-mth ave. T/O(HKDm) 1.3 Auditor Data source:bloomberg Performance 2 1.8 1.6 1. 1.2 1.8.6..2 Data source:bloomberg PwC Performance 1M 3M 12M Absolute (%) 12.8.3 32.5 Relative to HSI (%) 3.36 38.58 3.6 Data Source:Bloomberg Overvalued communication tower infrastructure service provider The mobile data growth is the basic driving force for the China Tower s business. The internet mobile application is the main factor to promote the mobile data growth. As known, G can satisfy most mobile application for personal users. The demand of mobile application lags may delay the investment for 5G. The investment for 5G is large amount, long cycle and stable growth Compared to G, the 5G investment has characters large amount, long cycle and the investment speed is stable, especially for the base station facilities. Different from G, the 5G applications are not mature yet and it is mainly used for the commercial applications. The personal demand for the 5G is not necessitous and this will make the operators only allocate their resources to some special regions in the first stage. And the investment speed may be not as high as expected. The selling pressure from restricted shares releasing and profit taking The China Tower listed in HKEX in 8 th Aug 218 and it launched 1 cornerstone investors and subscribed a total of 8.866 billion shares when it listed, accounting for 2.6% of H shares in issue upon completion of the Global Offering. The lock-up period for these shares are six months and up to 8 th February 219, the China Tower will be listed for six months and these shares will be released. Based on 1.26 HKD the offer price, these shares have book profit 3,56.8 million HKD. There is large selling pressure from restricted shares Underweight for profit margin is limited and hard to upgrade Based on the 5G construction plan issued by the operator and the processing of 5G application, we expected that the large-scale construction for the 5G will start in 22 and we don t think it will not contribute too much for the China Tower s performance in 219/22. According to the Bloomberg s consensus, the adjusted EPS for 219/22 is RMB.31/.8, which corresponds to 5.x/29.3x PE in 219/22 According to the IPO prospectus, there is no dividend in the past recording period and there is no pre-determined dividend payout ratio, compared to the international peers, most of them have an attractive dividend rate. And the major customers are the major shareholders for the group, there is no much price bargaining power for the group. As state-own public utilization company, the profit margin is limited. The group can increase its profit rate depending on sharing including the sharing of tower resources and the sharing public resources. The profit margin is relatively limited. Based on the illustration above, even though, we agree that China Tower is a good company with good prospect and there will be a good cash flow in the future for the company have signed a long-term contract which will last for 1-15 years. The price has been in advance and over expectations. We give a target price 1.36 which corresponding to 37.2x/2.x PE in 219/22 and this valuation will be fair to compared with the international peers. Research Department Fosun Hani Wang Hao Ph.D (852) 2979 688 George.wang@fosunhani.com End Dec 31 (RMBm) FY16A FY17A FY18F FY19F FY2F Revenue 55,997 68,665 72,758 78,777 85,9 Net Profit 55 2,91 2,715 5,518 8,33 EPS (RMB)..2.2.3.5 PE (x) 1863 72.89 82.8 5.3 29.3 PB (x) 2. 1.86 1.35 1.3 1.32 Dividend Ratio (%) - -.3 1.28 1.99 ROE (%).6 1.5 1.3 2.92.87

219 年 1 月 3 日 估值高估的通信铁塔基础设施服务提供商 目标价 (HKD) 1.36 219 年 1 月 29 日 1.67 股价 1.67 恒生指数 2762.85 52 周最低 / 最高.99/1.76 总市值 (HKDm) 293,93 日均成交额 (HKDm) 1.3 审计 过往股价表现 2 1.8 1.6 1. 1.2 1.8.6..2 罗兵咸永道 股票数据 1M 3M 12M 绝对回报 (%) 12.8.3 32.5 相对 HSI 回报 (%) 3.36 38.58 3.6 复星恒利证券研究部 Wang Hao Ph.D (852) 2979 688 George.wang@fosunhani.com 数据流量的增长是业务增长的根本驱动力, 应用端是流量增长的主要动力, 众所周知,G 通信可以满足绝大部分个人移动应用, 移动端应用的发展滞后有机会拖延 5G 投资建设的速度 5G 投资规模大, 时间长, 投资速度平稳 相对于 G,5G 投资规模更大, 尤其是对于基站设施的投资 但相对于 G 的投资, 由于 5G 应用尚未成熟, 并且主要以商业端的应用为主, 个人应用尚未成熟, 运营商可能会按需投资和部署, 相对 G, 5G 的部署需求可能短期并不能如预期那么快, 投资速度可能会更加平稳 中国移动用户数据流量由 212 年人均.8GB/ 年至 217 年 17.G/ 年, 年复合增长率 85.5%,222 年将达到 8.5%GB/ 年,217-222 年复合增长率 35.9% 限售股解禁, 获利盘沽压大 218 年 8 月 8 日, 中国铁塔于香港联交所上市,219 年 2 月 8 日, 中国铁塔上市六个月 中国铁塔上市时引入十名基石投资者, 合共认购 88.67 亿股, 约占全球发售完成时已发行 H 股的 2.6%, 锁定期半年, 以招股价 1.26 港元计算, 该部分股份合计账面获利 35.7 亿港元, 解除锁定期后该部分限售股沽压较大 议价能力弱, 盈利水平较难提升, 价值高估 根据运营商发布的 5G 建设计划以及 5G 应用的相关计划, 我们预期,5G 建设投资主要基础设施投资将从 22 年开始放量 根据彭博一致预测,219/22 经调整 EPS 分别为 RMB.31/.8, 分别对应 219/22 年 5.x 及 29.3x 的 PE 相对于国际同业, 根据集团介绍, 于过往记录期, 并无宣派股息, 并目前无预先厘定派息率 且集团客户本身为集团三大股东, 料利润率的提升主要依靠 共享 包括铁塔资源的共享及公共资源共享, 作为国有公用事业机构, 其利润水平相对受限, 利润率的提升空间相对受限 基于上述理由, 尽管我们同意中国铁塔是 5G 领域稀缺优质标的, 且 其未来业绩及现金流通过与运营商签订 1-15 年的合同提前锁定, 但鉴于 5G 投资周期及与同业的比较我们认为, 集团的价格已提前 超预期反应, 基于此, 我们给予集团 1.36 港币的目标价, 对应 219/22 年 37.2x/2.x PE, 且更为接近国际同业的估值 截至 Dec 31 (RMBm) FY16A FY17A FY18F FY19F FY2F 营业额 55,997 68,665 72,758 78,777 85,9 净利润 55 2,91 2,715 5,518 8,33 每股实际盈利 (RMB)..2.2.3.5 市盈率 (x) 1863 72.89 82.8 5.3 29.3 市净率 (x) 2. 1.86 1.35 1.3 1.32 股息率 (%) - -.3 1.28 1.99 净资产收益率 (%).6 1.5 1.3 2.92.87

China Tower is the world s largest telecommunications tower infrastructure service provider. According to the F&S report, the company s market share in the PRC telecommunications tower infrastructure industry was 96.3% in terms of the number of sites and 97.3% in terms of revenue in and as of December 31, 217. As of June 3, 218, China Tower operated and managed 1,898,139 sites, including 1,878,739 tower sites and 19, DAS sites, and served 2,78,559 tenants, including 2,679,1 tenants in macro cell business, 21,5 tenants in small cell business, 26,972 tenants in DAS business and 57,2 tenants in TSSAI business. As of June 3, 218, the company s tenancy ratio was 1.7 and the tenancy ratio of the TSP tenants for ground tower sites in operation was 1.5. From the date of China Tower establishment to June 3, 218, 71.1% of new TSP tenants were served through co-location. For the six months ended June 3, 218, the company built and delivered 3,773 new sites. Figure 1 China Tower' Share Holders Structure China Mobile China Unicom China Telecom China Reform Holdings Public Shareholders 27.9% 2.7% 2.5%.% 26.5% China Tower Source:Company, Research Figure 2 China Tower' Revenue Figure 3 China Tower' Net Profit 8 7 6 5 3 2 1 68665 55997 169 172 882 215 216 217 1Q217 1Q218 8 7 6 5 3 2 1 68665 55997 169 172 882 215 216 217 1Q217 1Q218 Revenue(RMB) Net Profit(RMB) Figure Peers Comparison

Ticker Company Name Mkt Cap PE ROE Dvd 12 PB EV/EBITDA Median Median 5,23.1 28.3 9.3 2.89.86 2.3 788 HK Equity CHINA TOWER CORP LTD-H 29,13.98 83.35 2.32-1. 9.91 BHIN IN Equity BHARTI INFRATEL LTD 58,191.55 21.17 18.26 7.53.35 8.1 TBIG IJ Equity TOWER BERSAMA INFRASTRUCTURE 12,353.1 1.51 9.37 3.6 6.2 - TOWR IJ Equity SARANA MENARA NUSANTARA PT 21,72.27 23.36 19.88 1.59.86 - AMT US Equity AMERICAN TOWER CORP 578,587.67 62.92 22.29 1.88 13.79 2.3 CCI US Equity CROWN CASTLE INTL CORP 37,222.1 68.68 6.55 3.76.5 19.8 SBAC US Equity SBA COMMUNICATIONS CORP 157,616.33 73.9 - - - 21.66 SITESB1 MM Equity TELESITES SAB DE CV 16,73.78 - -7.9-6.3 - CLNX SM Equity CELLNEX TELECOM SA 5,65.8-5.38.61 11.91 - INW IM Equity INFRASTRUTTURE WIRELESS ITAL 35,37.17 28.3 9.3 2.89 2.61 - Figure 5 Peers Comparison Listed in Hong Kong Ticker Company Name Mkt Cap PE ROE Dvd 12 PB EV/EBITDA Median Median 29,13.98 15.2 8.1 2.7 1.39 9.91 788 HK Equity CHINA TOWER CORP LTD-H 29,13.98 83.35 2.32-1. 9.91 552 HK Equity CHINA COMMUNICATIONS SERVI-H 9,936.59 15.1 9.7 2.31 1.38 12.62 232 HK Equity COMBA TELECOME SYSTEMS LTD,355.1 5.55 1.91.56 1.2 18.2 91 HK Equity CHINA MOBILE LTD 1,687,179.79 12.35 12.3.1 1. 5.1 728 HK Equity CHINA TELECOM CORP LTD-H 353,67.5 15.31 6.5 2.63.91-762 HK Equity CHINA UNICOM HONG KONG LTD 27,771.16 38.3 -.71 - -

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