China Tower Corp Ltd H

we have Executive Director and Chairman, Mr. Zhang Zhiyong. Executive Director, Mr. Gao Junlei. And Chief Accountant, Mr. Wu Xiaofeng. Now, around after this event, it's divided into two parts. Firstly, the management team will give you the results for 2023, and then we're going to have the Q&A session. Now, I'd like to give the floor to Chairman Zhang Zhiyong, who is going to give you a presentation on the overall performance of the company in 2023. Ladies and gentlemen, good afternoon. Welcome and thank you for joining us for China Towers 2023 annual results presentation. We would like to express our gratitude to you for your long-term support and interest in China Tower. Today's presentation is divided into three parts. Firstly, I'm going to give you the overall performance of the company. And then for the specific performance, it's going to be taken over by Mr. Gauteng Lei. And then in terms of our financial performance, it's going to be presented by Mr. Hu Shaofeng. After our presentations, we would be very happy to answer any question you have. In terms of the overall performance of the company, for last year, the company proactively provided service and moved towards the strategic goals of cyber power, digital China, and dual carbon. Fortified its position of one core and two wings while continuously deepen the development in sharing and coordination. The overall results for the past year grew steadily. Specifically, our overall performance was excellent. operational performance achieved double-digit growth of 11 percent. And supported by multiple pillars, Two Wings business revenue increased to 12.2 percent of the total operating revenue. So we have multi-revenue sources established. And our smart towers serve in digital governance. At present, 217,000 telecom towers have been upgraded to digital towers. The company also accelerated technological innovation. The R&D investment increased by 38 percent. The company also shared its fruitful results with shareholders. The dividend payout increased by 15.7 percent. In terms of the key indicators in 2023, as you can see from the slide, the major indicators are listed here. The annual operating revenue reached RMB 94.01 billion, an increase of 2 percent year-on-year. Profit attributable to the owners of the company reached RMB 9.78 billion, up 11 percent. As of the end of 2023, the number of tenants reached 3.658 million, and the tenancy ratio was 1.79, up 0.05 from the end of last year. The circulation level continued to increase. Due to the implementation of our policy, you can see our co-location rates continue to improve. You can see that five indicators are red, meaning continue to improve. There is one indicator, registered negative growth, and I believe this is of great concern to every one of you here. That is our operating cash flow. There seemed to be a negative growth. This is very much a result of the new round of pricing agreement and service agreements. So we need to upgrade and adjust the charging system, and we also need to verify data of orders, and we need to negotiate new service standards. So the account receivable collection process was negatively affected and the cash flow level was lower than that of the previous year. I'd say this slide was temporary because in Q4 last year it's already recovering and in January and February it's a positive growth trend again. So for the management we trust for the year 2024 the cash flow level will return to normal level. And so the drop last year is just a temporary thing. So in terms of our one core and two wings business, I'd say each business segment maintained a very good development trend. As you can see from the table here, excluding the impact of the commercial pricing agreements, which is a very big item last year, so excluding the impact of the commercial pricing agreements, because we have offered some discount as a result of the pricing agreement. Operating revenue on a comparable basis was RMB 97.72 billion, up 6 percent from the previous year. So it's a very healthy, very positive growth trend. In terms of other business, apart from our TSP business, the Two Wings business also grow very well. It account for 87.4% of total revenue. So revenue from the two-way business totaled RMB 11.50 billion, accounting for 12.2 percent of total revenue. That's after we're excluding the impact of the commercial pricing agreements. So you can see that our revenue from the two wings business has continued to improve in terms of its share of our total revenue growth. For the TSP business, we can continue to consolidate our leading position. expand the 5G network penetration coverage and seize the opportunities arising at key counties, fully push forward the healthy development of the TSP business. On a comparable basis, the TSP business grew by 3.4 percent. And in terms of our twin business, we continue to enhance resource sharing. Last year, the company had built 586,000 5G base stations, up 9.5 percent year-on-year, achieving a historical high. We have cumulatively built 2.347 million 5G base stations, supporting China in leading the world in terms of 5G network deployment. So we are indeed the leading force in the development of 5G in China. In terms of DAS business, it's another growth engine for the company. The company continued to leverage its advantage in coordinated construction, innovative products, and service solutions to help satisfy the demand for 5G upgrading of existing DAS as well as expanding to the new DAS market. So our covered building area was up 37.3% year on year, reaching 10.15 billion square meters. Our subway and high-speed railway tunnels coverage was up 20.1% year on year, reaching 11,625 and 12,447 kilometers respectively. So you can see the DAS coverage continue to expand. As for our two wins business, firstly, if we look at the smart tower business, the company sees the opportunities in digital economy and digital social governance. rely on our plentiful meet-the-high-point site resources and specialized operation advantages while continue to enhance its core capabilities in five areas of platform, data, algorithm, application, and operation. We also aim to build the differentiated advantages with this algorithm for high-point monitoring service, continuously transforming telecommunication towers to digital towers. As you can see from the slide, now we provide over 100-meter high-point algorithm. So with the plentiful scenario trainings, we are able to provide more than 100-meter high-point high-precision algorithms. At the same time, we have established more than 1.3 million unique meter high point database. So our algorithm will be more and more precise. We'll have more and more data and we'll be able to offer more value in the future. In terms of our energy business, our advantage has been shown in the recent years. We try to meet customer need by accelerating the product innovation. We try to meet customer need in terms of battery exchange and power backup. We try to upgrade battery exchange products and develop standardized products for power backup. Also, we accelerated the platform's upgrade and optimize our service systems to strengthen our service capabilities. At the same time, we enhanced the level of delicate management, optimized resource allocation, So we push forward battery exchange. This is for traction battery. We have a power backup. So there is cascade utilization of batteries. We have a much higher efficiency in our tower business. So for last year, our revenue from energy business achieved RMB 4.21 billion, which is a year-on-year increase of 31.7 percent. The business scale continues to expand rapidly. For last year, the company continued to expand its innovation-led development strategy, cultivating the new advantages in high-quality development through technological innovation. We centered around TAGI, the forefront of world technology, serving the main battlefields of the economy, fulfill the production and operation needs, meet actual customer needs, production and business needs. We focused on key areas such as AI, new energy, computing power networks, 5G, A, and 6G, and increased investment in scientific and technological innovation. We improved results output efficiency, empowered our technological advancement, and enhanced quality and efficiency. The new R&D investment increased by 38 percent. with the application for invention patents increased by 47 percent, and the authorized invention patents increased by two times. The company also continued to optimize the technological innovation systems and mechanisms. It built a four-in-one innovation system led by the headquarters, and was also the first batch establishing six technological innovation centers in places such as Hangzhou. We used the full list of capability level projects, resource allocation, and achievement transformation to drive technological innovation. The company is taking the lead in carrying out over 100 key scientific research projects to accelerate the formation of new quality productive forces. As you can see from the slide, the company continue to improve its operation and management capabilities. We can say for last year as a whole, We've firstly implemented various measures for the digital management of fund assets by carrying out intelligent operation maintenance, the one good for all single-side accounting system, and construction of the treasury system to improve digital operation capabilities. In addition, we deepened the incentive system of management-level employees by implementing specialized talent programs to stimulate the motivation within the company. reformed innovation capability and deepened the sharing of existing resources with new talents. Co-location rates reached 85 percent. We're continuing to house the sharing of social resources. Last year, 36.3 percent of new ground tower sites were constructed by utilizing social resources. So we improved the resource coordination and sharing capabilities of the company. Fourthly, we launch the collaborative development of the one-call and two-win strategy, drive the upgrade of telecommunication tower to digital tower, So through having power exchange cabinets to provide reverse power supply to base stations, we established a large-scale operation and maintenance system connecting all customers' access and maintenance, monitoring, and ordering dispatch to improve the collaborative development capability. Thus, we can lower cost and further improve efficiency. be our core or our to-win business. We can provide comprehensive support and service to our customers. So we utilize existing operation and maintenance systems to fully serve our one-point to-win customers. so that our operation and management cost can be greatly reduced. So as you can see, this year in terms of our operating revenue and we have the impact of the new commercial pricing agreement, we still achieve an 11 percent growth in net profit. That's very much due to the improvement in our operation management efficiency. The company also continue to improve its payout ratio. the company always attach great importance to shareholder returns, and we maintain a proactive dividend policy so that our shareholders can share the fruits of the company's development. So considering the future development needs and our cash flow level, the board recommended the distribution of a final dividend of RMB 0.037 3.9 per share for 2023, an increase of 15.7% year-on-year. The dividend payout ratio of distributable net profit is 75%. In the future, the company will continue to build on its development momentum, improve profitability, and create greater value for shareholders. The company actively practices corporate social responsibility and is committed to achieving a harmonious symbiosis with society and the environment. In terms of environmental protection, the company reduced duplicated investment construction industry through co-sharing and also will try to save land and reduce carbon emissions through various initiatives. In terms of our social contribution, the company successfully fulfilled its high-quality communication service for major events, for example, Asian Games in Hangzhou and the University Aid in Chengdu. China Tower has provided important telecommunication support, and also our emergency response in hazardous weather was also outstanding. So in terms of corporate governance, We stick to the diversification of the board and we utilize the rich experience of our board members. We try to implement high quality corporate governance to ensure the interests of our shareholders. So this is the last slide of mine looking to the future. We will achieve quality development through our strategic guidance. We will achieve upgrading and transformation and we will follow the development of emerging industries and by deepening the implementation of separate power, accelerating the upgrades of digitalization transformation to green and low carbon with ample room for the company's development. As you can see from the slide, the company will continue to implement the one-core and two-wings strategic layout, reinforce our core competitiveness, We will fully leverage our edge resource coordination and build reputation for unrivaled advantages in integrated costs, project delivery, and maintenance service, as well as low management risk. Further consolidate our leading position in our TSP business. We will also specialize in smart tower business and enhance energy business. thus driving the high-quality development of the Two Winds business and enhance enterprise value in order to bring greater return to all shareholders through the healthy development of the company. So that wraps up my presentation. Now I'd like to invite Mr. Gauteng Lei, our executive director, to introduce the business performance segment. Thank you. Thank you, Chairman. Thank you, dear friends. Now, I will continue to present the company's business performance by segment in 2023. This table shows the revenue and year-on-year changes in our businesses, as well as key operating data, and I will explain them further. So we achieved steady growth as we have always been doing. So I'm going to provide you with further details. In 2023, the company continued to strengthen its core competence under the strategic layout of one core and two wings. The overall development of various businesses was pretty good and revenue growth patterns supported by multiple pillars continued to consolidate. Excluding the impact of the commercial pricing agreement, the company's total operating revenue increased by RMB 5.55 billion, up 6% year on year. In terms of revenue structure, revenue from TSP business contributed 51.2% of which the tower business contributed 27.6% and the DAS business contributed 23.6 percent, driving revenue growth by 1.4 percentage points. The incremental revenue contribution of the Two Winds business increased to 46.7 percent, driving revenue growth by 2.8 percentage points, among which the smart tower business contributed 28.4 percent, and the energy tower business contributed 18.2 percent. Next, I will discuss the performance of our key businesses in detail. In terms of the tower business, the company continued to strengthen resource coordination and sharing capabilities, shorten the demand delivery lease commencement cycle, and tackle difficult sites to fully meet customer needs. We started to explore the development of 5G plus industrial internet services and opportunities arising from the diverse development of the tower business to expand the scope of sharing. Our customer service capabilities have been continuously improved. we continue to expand our market. In 2023, excluding the impact of commercial pricing adjustments, the tower business achieved annual revenue of RMB 78.74 billion, an increase of 2% year-on-year, As the end of 2023, the number of TSP tenants reached 3.424 million, a net increase of 62,000 from the end of the previous year, and a year-on-year increase of 1.8%. The TSP tower tenancy ratio increased from 1.65 to 1.68, indicating an increasing level of co-location. In terms of the DAS business, the company continued to coordinate site entry and construction and expanded the industry's 5G coverage with a focus on key industries. continue to improve our service support capability. At the same time, we explore the potential of sharing existing DAS and enhance the standard product designs to provide customers with differentiated DAS sharing solutions and strengthen professional service capabilities. At the same time, we also provide professional service, improve our product design, better control our cost, and achieve competitiveness. In 2023, the company's revenue from the DAS business was RMB 7.14 billion, a year-on-year increase of 22.5 percent. In terms of our smart tower business, The company focused on spatial digital governance in various industries and continued to promote the expansion of mid- and high-point tower site resources to a wider range of national economy and livelihood fields. By the end of 2023, approximately 217,000 telecommunication towers were upgraded to digital towers, which cover more than 40 important national and livelihood areas, including forestry and grass, environmental protection, water resources, agriculture, transportation, land and emergency. We also maintain a market-leading position in multiple application scenarios such as straw burning, farmland protection, fishery law enforcement, and forest fire prevention. For last year, the tower sharing business revenue achieved RMB 2.56 billion, accounting for 35.1 percent of smart tower business revenue. Tower monitoring revenue achieved RMB 4.73 billion, accounting for 64.9 percent of smart tower business revenue. The capabilities of spatial digital governance services have been further enhanced. The company also improved its R&D capability in its smart tower business, and we continue to consolidate our core advantages in platforms, algorithms, and applications. The results of innovation became more evident, and its development momentum grew stronger. enhanced the capability of the platform construction by deploying around 17 sites nationwide, achieved a platform-based distribution deployment, and a centralized data operation. Secondly, the company leveraged spatial governance algorithm training tools and an extensive range of mid- and high-point data training scenarios to continuously conduct algorithm iteration and upgrading. Thirdly, the company integrated business systems with operation and maintenance systems to achieve precise diagnosis, real-time order dispatch, switch processing, and gradually form differentiated advantages in professional maintenance capabilities. Fourthly, the company reached the industrial application product system by adding many new industrial application products. Product iteration development capabilities continue to improve. Fifthly, the company promoted collaborative innovation in industrial cooperation, conducted R&D pilot projects with key universities, signed strategic cooperation agreements with key clients in multiple industries such as agriculture, forestry, water conservation, continuously enhance the level of collaborative innovation. For the energy business, the company focused on battery exchange and power backup business segments and provided diversified smart energy services and solutions to help achieve the national goals of carbon peaking and carbon neutrality. Last year, in terms of battery exchange, product iteration upgrades sped up and accelerated the application of technological R&D results. We strengthened customer service capability and continuously improved customer satisfaction. By further developing the consumer market while stepping up efforts to expand our partnership with corporate customers, the company maintained a market share advantage. In 2023, the battery exchange segment generated a revenue of RMB 2.07 billion, a year-on-year increase of 14.8%. By the end of 2023, the company has launched battery swapping services in more than 300 cities, serving over 1.145 million battery exchange users. The company has further reinforced its leading position in battery exchange for light electric vehicles. In terms of the power backup business, we attach equal importance to strengthening both quantity and quality. But deepening the four-in-one power backup solution covering power backup, power generation, monitoring, and maintenance, we promoted standardized products for power backup. We also accelerated the expansion of the customer base in key industries such as communications, healthcare, and finance, and actively built the energy butler service model to promote the rapid expansion of power backup business. In 2023, the power backup business achieved total revenue of RMB 1.74 billion, a year-end increase of 48.4 percent. Its scale grew rapidly. So that's my presentation. Now I'd like to give the floor to our chief accountant, Mr. Hu Shaofeng, to present the company's 2023 financial performance. Thank you, Mr. Gao, our analyst friends. Good afternoon. Now, I'd like to walk you through the company's financial performances for the year 2023. The table shows our key financial indicators in 2023. The company achieved good overall business performance with steady revenue growth in 2023. Our capital structure is steady. and healthy and profitability continue to improve. So the previous speakers have already shared with you the performances of our company so I'm going to focus on our cash flow and other financial topics. The company intensified efforts to reduce cost and improve efficiency, give priority to ensuring expenditure directly related to business expansion, strengthen the reuse and longevity of assets and operation, and support expenses for single-side improved cost efficiency. Expense for the year totaled RMB 79.51 billion, an increase of 0.8% year-on-year. Operating expenses accounted for 84.6% of operating revenue, down by one percentage point from the previous year. In terms of depreciation, amortization, and site operation and maintenance expenses, the company continued to improve its asset operation capabilities and service quality and coordinated its investment in site replacement, enhancement, repairs, and maintenance to reasonably reduce operating expenses. Depreciation and amortization totaled RMB 49.5 billion, a decline of 1% from the previous year. Repairs and maintenance costs totaled RMB 7.41 billion, a decline of 2.4% from the previous year. And in terms of employee benefits and expenses, in 2023, the company actively introduced top technological talent and frontline management personnel for business development, promoted the strategy of strengthening enterprise through talents and empowering frontline operational units, and at the same time strengthened performance-oriented incentives linked to work efficiency. For the year, the employee business benefits and expenses amounted to RMB 8.84 billion, a year-on-year increase of 11.4 percent. For other expenses, mainly due to the support of the development of the two wings business, promote the construction of companion service systems, and to strengthen support for products and technological solution. The localized management technological support services construction, it continued to address safety risks and increase construction of infrastructure and platforms for the two wings business. The annual CAPEX was RMB 31.72 billion, a year-on-year increase of 21 percent. You can see we continue to improve. The company's net profit for the year continued to improve. It's an increase of 9 percent over the previous year. In terms of CapEx, we try to service the development of the company and serve the needs of the network development of the company. In terms of CAPEX, for site replacement improvement was RMB 8.53 billion, a year-on-year increase of 41.1 percent, mainly due to the increase in the useful life of assets. The company focused on expanding the longevity of assets and addressing safety issue. In terms of site construction augmentation, the CAPEX was RMB 17.05 billion, a year-on-year increase of 16.3 percent, mainly due to the change in the demand structure of TSPs, the increasing demand for new tower construction. The company also further strengthened project management, construction implementation, and transfer progress needs, and enhanced accelerated product construction delivery. And the capital expenditure for smart tower energy business facilities was RMB 4.48 billion, a year-on-year increase of 16 percent, mainly to adapt to the business development needs of two wings, increase investment in key areas such as industry product R&D, platform iteration upgrades. The company's cash flow from operating activities was RMB 32.84 billion, and free cash flow was RMB 1.13 billion. Our chairman already elaborated on this earlier. This is very much because of the auditing of the service agreement, and we need to negotiate service standards and upgrade the billing system and verify the order numbers. So the receivables was under pressure for the first half of the year. But in the second half of the year, the trend began to pick up. And the company cash flow from operating activities in the second half of the year was RMB 21.29 billion, an increase of RMB 9.72 billion and 84.2 percent higher than the first half of the year. In the second half of the year, free cash flow reached RMB 2.39 billion. In 2024, the company gradually accelerated its collection of funds. In the months of January and February, the fund's collection amounted to RMB $211 billion, showing a significant increase compared to the average monthly revenue collection in the previous year. As at the end of 2023, the company's liability to asset ratio was 39.4 percent and its gearing ratio was 31.4 percent. The overall capital structure remained healthy. In 2024, the company will continue to deepen the one-coin, two-wings strategy, further build upon the operating system that is professional intensive, dedicated, efficient, digitized, consolidate the foundation for asset operation, facilitate the sustainable healthy growth of the company, create greater value for shareholders. Thank you.