China Tower Corp
　　Steady growth in well positioned market
　　China Tower’s 1H24 earnings increased by 10.1% YoY to RMB5.3bn, largely in line with our estimates, although one-off issue on power back up business slowed down energy related revenue growth. Improving ROIC may trigger share re-rating in the long term. Reiterate BUY and lowered target price from HK$1.30 to HK$1.25 with revised 2024-26 earnings.
　　Key Factors for Rating
　　1H 2024 earnings increased by 10.1% YoY to RMB5.3bn, largely in line with our estimates, on the back of 3.2% YoY EBITDA increase to RMB33.0bn thanks to slowdown in depreciation expense growth at 1.2% YoY. EBITDA margin decreased by 0.4ppt YoY due to the increase of personnel and site operational support expenses.
　　Operating revenue in 2Q24 accelerated to 4.3% YoY, from 3.3% YoY in 1Q24, mainly driven by accelerating growth of DAS business (+23.4% YoY) in 2Q24 vs 19.8% YoY in 1Q24.
　　Cash flow significantly improved from 2023 to 1H24, following the full implementation of the new phase of Commercial Pricing Agreements, and management expects a healthy and stable cash flow going forward, supported by better control over its accounts receivables.
　　Company proposed to pay interim dividend of RMB0.0109 per share, supported by the high-quality development of all businesses. Company also said in the results call that the payout ratio for 2024 should not be lower than 75%.
　　Key Risks for Rating
　　Tower rental revenues contribute to the majority of Company’s earnings, and therefore depend on telco’s network expansion plan.
　　Valuation
　　Reiterate BUY. Our DCF model suggested a fair value of HK$1.25/share based on our revised 2024-26 earnings as we have adjusted our 2024-26 estimated earnings by 1.1%, -2.5% and -1.9% while factoring in lower energy related revenues and also higher site operating support expenses in 2025/26E.