Release Date: March 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

China Tower Corp Ltd (CHWRD) reported a 10% increase in net profit for 2024, indicating strong financial performance. The company achieved sustained revenue growth, with total operating revenue reaching RMB 97.77 billion, a 4% year-on-year increase. The dividend payout ratio increased to 76%, reflecting a commitment to returning value to shareholders. China Tower Corp Ltd (CHWRD) upgraded 230,000 telecom towers to digital towers, enhancing service capabilities across various industries. The company significantly improved its cash flow, with net cash flow from operating activities reaching RMB 59.47 billion, a substantial increase from the previous year.

Negative Points

The power backup business experienced a year-on-year revenue decline of 4.6%, indicating challenges in this segment. Operating expenses increased by 2.4% year-on-year, which could impact overall profitability if not managed effectively. The liability to asset ratio stood at 30.9%, which may raise concerns about the company's leverage and financial stability. Despite revenue growth, the tower business only saw a modest increase of 0.9%, suggesting limited expansion in this core segment. Employee benefits and expenses rose by 8.2% year-on-year, potentially affecting the company's cost structure and margins.

Q & A Highlights

Warning! GuruFocus has detected 9 Warning Signs with CHWRD.

Q: Can you elaborate on the company's strategy for expanding the 5G network and its impact on revenue growth? A: Mr. Zhao Zhiyong, Chairman: The company has actively seized opportunities from 5G network penetration and coverage, improving resource coordination and sharing. In 2024, 412,000 5G base stations were built, bringing the total to 2.759 million. More than 95% of 5G projects were delivered through site co-location, contributing to a 2.4% increase in the TSP tenancy ratio year on year. This strategic focus has supported steady revenue growth in our TSP business.

Q: How has the company managed to improve its cash flow significantly in 2024? A: Mr. Hu Xiaofeng, Chief Accountant: The company implemented a special project to reduce costs and increase efficiency, alongside strengthening benchmarking evaluations and management of individual sites. As a result, net cash flow from operating activities increased by RMB16.63 billion year on year, reaching RMB59.47 billion. This improvement was also supported by effective CapEx management and enhanced payment collection from TSP customers.

Story Continues

Q: What are the key drivers behind the growth in the smart tower business? A: Mr. Chen Li, General Manager: The smart tower business saw rapid growth, with revenue increasing by 22.4% year on year. Key drivers include leveraging our vast resource endowment, enhancing product innovation, and focusing on key industries such as emergency response and agriculture. We upgraded 230,000 telecom towers to digital towers, which helped maintain our leading position in new market shares.

Q: Could you provide more details on the company's R&D investments and their outcomes? A: Mr. Zhao Zhiyong, Chairman: In 2024, R&D expenses increased by 40% year on year, with a focus on AI, green and low-carbon technologies, and edge computing networks. The number of granted patents rose by 68%, and we achieved five international standards. These investments have strengthened our technological innovation system and enhanced our competitive edge.

Q: How is China Tower addressing environmental and social responsibilities? A: Mr. Zhao Zhiyong, Chairman: The company actively promotes green transformation by reducing carbon emissions through co-building and co-sharing base stations. We also focus on social welfare, such as emergency rescue work and improving communication infrastructure in remote areas. These efforts align with our commitment to sustainable development and social responsibility.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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