股

票

研 [Table_Title] Gin Yu 余劲同 Company Report: China Tower (00788 HK)

究 (852) 2509 2130 EquityResearch 公司报告： 中国铁塔 (00788 HK) [email protected]

6 March 2020 Leading[Table_Summary 5G] Infrastructure Provider, Initiate With "Accumulate"

领先的5G基础设施提供商，首予“收集”评级

 5G network construction will bring new demand for telecommunication 公 Rating:[Table_Rank] Accumulate towers. Rapid development of mobile Internet and the implementation of Initial

司 speed upgrade & tariff reduction policy will promote the demand of network

报 expansion. In addition, 5G construction has started, which will boost demand 评级： 收集 (首次覆盖) for telecommunication towers in the future. We expect that the novel 告 coronavirus pneumonia ("NCP") epidemic will change the pace of 5G network

CompanyReport 6[Table_Price]-18m TP 目标价 : construction, but won't reduce the scale of construction. HK$2.18

 China Tower (00788 HK) is the largest telecom tower infrastructure Share price 股价: HK$1.970 service provider in the world. Based on the "One Core and Two Wings" strategy with sharing as the basis, we expect the Company's tower business,

DAS business, and TSSAI business to continue to grow, and the growth of 告

Stock performance

sharing rate will continue to increase the Company's profit margins.

证 股价表现 报

[Table_QuotePic] 券  We forecast the Company's revenue and shareholders' net profit to 30.0 % of return 究 grow at a CAGR of 7.6% and 54.9%, respectively, in 2018-2021. Based on 25.0

研 20.0

5G base station construction requirements, discounts on tower licensing fees

研 15.0

究 of site co-sharing and huge development opportunities of the "two-wings" 10.0 券 business, we forecast the Company's revenue to increase by 6.9%/ 7.5%/ 5.0 报

8.4% in FY19-FY21, respectively. Based on our forecasts on revenue growth, 0.0 证

告 co-sharing rate and operating expenses, we forecast EPS to be RMB0.028/ (5.0)

EquityResearch Report

RMB0.041/ RMB0.056 in FY19-FY21, respectively. (10.0)

(15.0)

 We initiate our coverage on China Tower with a TP of HK$2.18 and an (20.0) Mar-19 Jun-19 Sep-19 Nov-19 Feb-20 investment rating of "Accumulate". Our TP corresponds to 7.8x/ 7.1x/ 6.4x [Tab HSI Index China Tower FY19-FY21 EV/EBITDA and a discount of 1.7% to our DCF valuation. le_I  5G 网络的建设将带来对通信铁塔新的需求。移动互联网的快速发展以及提速降费政策的 nfo1 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 推行将促进网络扩容的需求，此外，5G 建设已经起步，未来会促进通信铁塔的需求。我 股价变动 个月 个月 年 ] 1 3 1 通 们预计新型冠状病毒肺炎疫情将改变 5G 网络建设的步伐，但不会减小建设规模。 Abs. % 7.7 22.6 4.8 信 绝对变动 % Rel. % to HS Index  中国铁塔(00788 HK)是全世界最大的通信铁塔基础设施提供商。基于以共享为基础的“一 11.8 23.1 14.0 设 相对恒指变动 % 体两翼”战略，我们预计公司的塔类业务、室分业务、及跨行业业务将会得到持续的增长， Avg. Share price(HK$) 备 1.9 1.8 1.9 同时共享率的提升将会不断提高公司的利润率。 平均股价（港元） 行 Source: Bloomberg, Guotai Junan International. 业  我们预测公司的收入和股东净利将于 2018 年至 2021 年间分别以 7.6%和 54.9% 的复合 年增长率增长。基于 5G 基站的建设需求、站址共享的铁塔租赁费折扣、和“两翼”业务的 巨大发展空间，我们预测公司的收入在 2019 到 2021 财年间将分别同比增长 6.9%/ 7.5%/ 8.4%。基于我们对于收入增长、共享率、运营费用的预测，我们预测 2019 财年至 2021

财年的每股盈利分别为人民币 0.028 元/人民币 0.041 元/ 人民币 0.056 元。 Telecommunication Equipment Sector Telecommunication Equipment

 我们首次覆盖中国铁塔并给予 2.18 港元的目标价以及“收集”的投资评级。目标价对应 7.8

倍、7.1 倍和 6.4 倍 2019-2021 的 EV/EBITDA，且较我们的现金流折现法估值有 1.7%的 [Tab 折让。 le_I Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE

nfo2 年结Profit] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率

12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%) ] 2017A 68,665 1,944 0.015 1,400.0 109.3 0.986 1.7 0.000 0.0 1.5 中 2018A 71,819 2,650 0.018 20.0 96.1 1.216 1.4 0.002 0.1 1.7 国 2019F 76,759 4,949 0.028 55.6 63.3 1.051 1.7 0.004 0.2 2.7 铁 2020F 82,541 7,138 0.041 46.4 42.8 1.088 1.6 0.006 0.3 3.8 2021F 89,489 9,841 0.056 36.6 31.3 1.138 1.5 0.008 0.5 5.0 塔 [Table_BaseData]Shares in issue (m) 总股数 (m) 176,009.0 Major shareholder 大股东 China Mobile Group 27.9% Market cap. (HK$ m) 市值 (HK$ m) 346,737.7 Free float (%) 自由流通比率 (%) 30.9

ChinaHK) Tower (00788 3 month average vol. 3 个月平均成交股数 (‘000) 441,868.5 FY20 Net gearing (%) FY20 净负债/股东资金 (%) 44.7 52 Weeks high/low (HK$) 52 周高/低 (HK$) 2.330 / 1.560 FY20 Est. NAV (HK$) FY20 每股估值（港元） 2.2

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 18

[Table_PageHeader]China Tower (00788 HK)

Table of Contents ] 1 r a M t h g i R _ e l b a T [

Industry Analysis………………………………………………………………………………………...3

Features of Telecommunication Tower Infrastructure Industry…………………………………....3 China Telecommunication Tower Infrastructure Industry…………………………………………..3

China Telecommunication Service Industry…………………………………………………………4 6 March2020 Driving Factors………………………………………………………………………………………….6

Company Analysis……………………………………………………………………………………….7 Company Introduction………………………………………………………………………………….7 Business Overview……………………………………………………………………………………..7 Competitive Strengths………………………………………………………………………………….9 Development Strategies………………………………………………………………………………10 Financial Analysis……………………………………………………………………………………….11

] 2 r a M t h g i R _ e l b a T [ Revenue Analysis……………………………………………………………………………… ……...11 Profit Analysis………………………………………………………………………………………….12 Valuation & Investment Rating…………………………………………………………………….….14

Key Risks………………………………………………………………………………………………….15

Financial Statements and Ratios……………………………………………………………………..17

(00788 HK)

中国铁塔 China Tower

Report

Company

See the last page for disclaimer Page 2 of 18 [Table_PageHeader]China Tower (00788 HK)

Industry Analysis

] 1 r a M t h g i R _ e l b a T [

Telecommunication tower infrastructure service providers offer site resources and relevant services to telecom

operators and other customers. In order to ease pressure from capital expenditure, more and more telecom operators choose to spin off their sites and related assets to telecommunication tower infrastructure service providers.

Figure-1: Industry Chain of Telecom Tower Infrastructure Industry 6 March2020 Survey, design & Construction Construction Site ancillary Maintenance supervision suppliers material suppliers facilities suppliers suppliers companies

Telecom network integrators, Telecom tower infrastructure telecom equipment and service providers network equipment suppliers

] 2 r a M t h g i R _ e l b a T [

Telecom service providers

Source: the Company, Guotai Junan International.

Features of Telecommunication Tower Infrastructure Industry

Telecommunication tower infrastructure providers usually have a stable relationship with customers and stable cash

inflows. Service contracts of telecommunication tower infrastructure service providers with telecom operators usually have terms from five to fifteen years, and the services usually have relatively high renewal rate. Given the long contract term and relatively strong creditworthiness of customers (mainly telecom operators), telecommunication tower infrastructure service providers usually

have stable cash inflows. (00788 HK)

Site sharing will enhance profitability. One tower site can serve several tenants. Thus, through site sharing, telecommunication tower infrastructure service providers could generate additional revenue without the need to build additional tower sites. As the 中国铁塔 capital expenditure of sites maintenance and enhancement are much lower than new site construction, site sharing will improve profit margins significantly.

China Tower China Telecommunication Tower Infrastructure Industry

We expect that the novel coronavirus pneumonia ("NCP") epidemic will change the pace of 5G network construction, but won't reduce the scale of construction. Due to the delay of resumption of work nationwide, we expect 5G network construction progress to be affected in 1Q20. However, we don't expect the epidemic to reduce the total amount of 5G base station construction demand; in contrast, the NCP epidemic will stimulate demand for 5G, as we can see market space for many 5G application scenarios such as remote medical consultation, online education, online office, etc.

China telecommunication tower infrastructure market is highly concentrated. There are over 200 companies providing telecommunication tower infrastructure services, however, no more than 10 companies have more than 1,000 sites. China Tower accounted for over 97% of the total market share. We expect the competition landscape to be relatively stable in the future, given the scale effect and support from government policies.

The telecommunication tower infrastructure industry in China has high entry barriers. Telecom operators usually have very

Report stable relationships with telecommunication tower infrastructure providers, and the cost to relocate base stations is relatively high.

The construction and operation of a large-scale site resource requires huge capital expenditure and working capital. Thus, scale

effect is very crucial for the industry. Company

See the last page for disclaimer Page 3 of 18 [Table_PageHeader]China Tower (00788 HK)

The major operating costs for telecommunication tower infrastructure providers in China are depreciation and

amortization, land lease fee and maintenance expenses. Depreciation and amortization] 1 mainlyr a comesM t h fromg i towersR _ e whichl b area T [

affected by steel price. Due to strong bargaining power, telecommunication infrastructure providers will be less affected by

fluctuations in raw material prices. Besides, land lease fee and maintenance expenses are expected to be relatively stable. As to the ground lease charges, we expect it to be relatively stable and local governments may give discounts to China Tower to promote the development of 5G.

Figure-2: Steel Price Indices of the PRC Figure-3: Average Annual Salaries of Professional 6 March2020 Technicians in the Construction Industry

180 RMB 80,000 160 68,760 140 70,000 59,532 120 60,000 56,139 53,153 50,086 47,639 100 50,000

80 40,000

60 30,000

] 2 r a M t h g i R _ e l b a T [ 40 20,000 20 10,000

0

01 06 11 04 09 03 08 01 06 11 04 09 02 08 01 06 11 04 09 02 02 07 12 05 10 07 12 05 10 03 07 12

------

- 0

2007 2007 2007 2008 2008 2011 2011 2012 2012 2012 2013 2013 2014 2016 2017 2017 2017 2018 2018 2019 2009 2009 2010 2010 2014 2014 2015 2015 2016 2019 2019 2009 2013 2014 2015 2016 2017 2018

Source: China Iron and Steel Industry Association, Guotai Junan Source: National Bureau of Statistics of China, Guotai Junan International. International.

China Telecommunication Service Industry

Revenue from telecommunication services increased steadily. In 2019, revenue from telecommunication services increased

by 0.8% yoy to RMB1,310 billion. The growth rate was up by 0.8 ppt compared to 1H19. Revenue from mobile data and internet (00788 HK) business increased by 1.5% yoy to RMB608.2 billion.

Large mobile user base and increased 4G user proportion. As at the end of December 2019, the total number of mobile users 中国铁塔 of the three major telecommunication operators in China reached 1.60 billion, an increase of 2.3% yoy, which makes China the biggest telecommunication market in the world. Among them, 4G users were 1.28 billion, accounting for 80.1% of total mobile

users, up by 5.7 ppt YTD. The large and rising 4G user base will promote growth in mobile data traffic consumption in China, thus China Tower continuing to promote demand for telecommunication towers.

Figure-4: Monthly Telecom Revenue in China Figure-5: Cumulative Telecom Revenue YoY Growth in 2019

RMB Billion 3% 2.8% 130

3% 120 1.9% 2% 110

2% 100 1.0%

1% 0.8% 90 0.7% 0.5% 1% 0.3%

80 0.2%

0.0% 0.0% -0.02% 0% -0.15%

70

Report

-1%

60

Company Source: Ministry of Industry and Information Technology, Guotai Junan Source: Ministry of Industry and Information Technology, Guotai Junan International. International. See the last page for disclaimer Page 4 of 18 [Table_PageHeader]China Tower (00788 HK)

Figure-6: Total Number of Mobile Users in China Figure-7: Total Number of 4G Users in China

Million ] 1 r a M t h g i R _ e l b a T [ Total Mobile Users(LHS) YoY Growth(RHS) Million Total 4G Users(LHS) YoY Growth(RHS)

1,650 12% 1,400 35%

1,600 10% 1,200 30%

1,550 1,000 25% 8%

1,500 800 20% 6 March2020 6% 1,450 600 15%

4% 1,400 400 10%

2% 1,350 200 5%

1,300 0% 0 0%

Source: Ministry of Industry and Information Technology, Guotai Junan Source: Ministry of Industry and Information Technology, Guotai Junan International. International.

Speed upgrade & tariff reduction policy continued to be implemented in 2019. The 2019 Government Work Plan mentioned

] 2 r a M t h g i R _ e l b a T [ to promote the expansion and upgrade of mobile network base stations. In 2019, the average broadband tariff for SMEs reduced by more than 15%, and the average tariff for mobile network traffic reduced by more than 20%. Besides, the "number portability" strategy was implemented throughout the country in 4Q19, which is expected to stimulate telecom operators to improve their network quality to keep existing customers and acquire new customers.

Rising DOU will promote demand for network expansion and upgrade. Due to the speed upgrade & tariff reduction policy and the rapidly developing mobile internet, cumulative mobile internet access traffic in China increased by 71.6% yoy to 122.0 billion GB in Jan.-Dec. 2019. Monthly traffic per mobile internet user in Dec. 2019 was 8.59 GB, an increase of 37.4% yoy, but the DOU in Dec. 2019 was relatively flat throughout 2H19, which was due to the diminishment of 4G data bonus. However, 5G is expected to stimulate data traffic consumption of consumers. The explosive growth of data traffic consumption will raise the utilization rate of

telecommunication networks, bringing demand for network expansion and upgrade, which will generate strong growth momentum (00788 HK) to telecommunication tower infrastructure providers. Besides, we expect the NCP to stimulate data consumption in 1Q20 as civilians are mostly at home during the epidemic.

中国铁塔 Figure-8: Mobile Internet Access Traffic in China Figure-9: Per Capita Mobile Internet Access Traffic

Billion GB Monthly Mobile Internet Access Traffic (LHS) YoY Growth (RHS) GB 10 12 250% 8.64 8.54 8.59 China Tower 9 8.33 8.39 8.27 7.81 7.84 10 8 7.27 7.32 200% 7 6.35 6.25 6.1 8 5.66 5.79 6 150% 5 6 4 100% 4 3

2 50% 2 1

0

0 0%

01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12

------

2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019

Source: Ministry of Industry and Information Technology, Guotai Junan Source: Ministry of Industry and Information Technology, Guotai Junan

International. International.

Capital expenditure of telecom operators on wireless networks is huge and will continue to rise. In 1H19, CAPEX of the Report three major telecom operators in China reached RMB142.2 billion, an increase of 14.6% yoy. The proportion spent on wireless

networks increased by 12.6 ppt yoy to 51.2%. The three major telecom operators planned to spend total RMB302 billion in CAPEX in FY19, an increase of 5.2% yoy. Company

See the last page for disclaimer Page 5 of 18 [Table_PageHeader]China Tower (00788 HK)

Driving Factors

] 1 r a M t h g i R _ e l b a T [

The number of 4G users still has room to grow. As at the end of Dec 2019, 4G users reached 1.28 billion, accounting for 80.1%

of total mobile users. 4G penetration rate in China is still lower than many developed markets, e.g. United States, Japan, South Korea, etc.

Data traffic consumption rise will boost network capacity expansion. We expect that rapid development of mobile internet (including mobile video, mobile game and e-commerce) will continue to promote total data traffic consumption in China. 6 March2020 Besides, the significant decline in data tariff and more application scenarios in 5G will also promote total data traffic consumption in China. The increase in data traffic consumption will drive demand of mobile network capacity expansion.

5G will bring new network construction requirements. Large scale commercial 5G networks are expected to be constructed from 2020. We expect telecom operators to utilize a large amount of existing towers to install 5G base station equipments, which will increase the sharing rate of sites. In addition, due to the higher deployment frequency band of 5G, requirements of base station construction are expected to be very strong.

Site sharing will promote the construction of base stations. Site sharing will reduce the cost of base station deployment,

which will accelerate the construction process of telecom operators, thus boosting profit growth] of2 ther a telecomM t h towerg i R industry._ e l b a T [

(00788 HK)

中国铁塔 China Tower

Report

Company

See the last page for disclaimer Page 6 of 18 [Table_PageHeader]China Tower (00788 HK)

Company Analysis

] 1 r a M t h g i R _ e l b a T [

Company Introduction

China Tower (the Company) is the largest telecommunication tower infrastructure service provider in the world. In order to reduce duplicate construction and waste of resources in telecommunication network construction, China Tower was jointly funded by China Mobile, China Unicom and China Telecom. As at end of 3Q19, the Company operated 1.974 million tower sites and served 3.165 million tower tenants, helping the three telecom operators to build the world's largest 4G network. 6 March2020

Table-1: Key Milestones Year Milestones 2014 Established jointly by China Mobile, China Unicom and China Telecom.

2015 Acquired certain existing telecommunication towers and related assets and commenced substantive commercial operations.

Issued new shares to existing shareholders and China Reform.

Obtained the Basic Telecommunications Business Operation License (domestic] 2 r telecommunicationsa M t h g i R _ e l b a T [

facilities service business) and the Value-added Telecommunications Business Operation License (web hosting) issued by the Ministry of Industry and Information Technology.

2016 Entered into the Commercial Pricing Agreements with the three telecom operators.

2017 Became a member of the International Telecommunication Union

2018 Entered into the Supplemental Agreements to the Commercial Pricing Agreements, and the Service Agreements with the three telecom operators.

Initial public offering on the Hong Kong Stock Exchange.

Set up Smart Tower Corporation Limited and Energy Tower Corporation Limited (00788 HK)

2019

Source: the Company, Guotai Junan International.

中国铁塔 Figure-10: China Tower's Shareholding Structure as at 31 January 2020

China Mobile China Unicom China Telecom China Reform H Shareholders China Tower

27.9% 20.7% 20.5% 4.4% 26.5%

China Tower

Source: the Company, Guotai Junan International.

Business Overview

Report

The Company's business comprises of mainly following three main business lines: tower business, indoor distributed antenna system business (DAS business), and trans-sector site application and information business ("TSSAI"

business). Tower business includes macro cell business and small cell business. The Company's revenue is mainly from

Company macro cell business. The Company's customers are mainly the three major telecom operators in China.

See the last page for disclaimer Page 7 of 18 [Table_PageHeader]China Tower (00788 HK)

Figure-11: China Tower's Revenue Breakdown by Figure-12: China Tower's Tower Business by Nature

Business Line ] 1 r a M t h g i R _ e l b a T [

Tower business DAS business TSSAI business Revenue from the provision of Site Space Revenue from Services

80,000 1,222 100% 169 15.9% 15.4% 70,000 1,819 90% 15.4% 15.7% 1,284 80% 60,000 19 1,355 421 1,924 70%

50,000 6 March2020 60% 40,000 50% 67,085 68,597 84.6% 84.3% 84.1% 84.6% 30,000 40% 55,552 53,636 30% 20,000 20% 10,000 10% - 0% 2016A 2017A 2018A 1-3Q19 2016A 2017A 2018A 1H19

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Macro cell business provides tower sites, shelters or cabinets, and ancillary equipment to telecom operators to install their telecom equipments. Besides, China Tower also provides maintenance services as well as power services to telecom

] 2 r a M t h g i R _ e l b a T [

operators. Macro cell business is to help telecom operators achieve wide network coverage, and it's the Company's main source of income. In 1HFY19, macro cell business accounted of 93.5% of the Company's total operating revenue. Due to the construction and expansion of wireless networks, the number of macro cell tower sites and tenants both achieved relatively rapid growth. Because of the trend of digitalization and smart society, we expect the network expansion needs to remain strong, which will ensure the sustainable development of the Company's macro cell business.

Similar to macro cell business, small cell business also provides site space and maintenance & power services for

small cell equipments of telecom operators. Small cell is to help telecom operators achieve deep coverage and expansion of wireless networks, mainly in densely populated areas and building-intensive areas. The Company uses social resources such as street light poles, surveillance poles, and utility poles as site space for small cell in order to reduce construction cost

and increase construction speed and efficiency. Features of 5G will boost the requirements of small cell construction, which (00788 HK) gives huge market space for the Company's small cell business.

DAS Business provides DAS sites to telecom operators and connects telecom equipments to the Company's 中国铁塔 distributed antenna systems. Besides, The Company also provides ancillary equipment and maintenance & power services to DAS sites. DAS business is to meet the demand for wireless network coverage inside buildings and tunnels. As at the end of

1H19, the Company's DAS business covered building area of 1.91 billion square meters, subway area of 3,110 km and China Tower high-speed rail area of 18,281 km. We expect that network coverage demand for buildings, subways, and high-speed railways will remain strong, which will continue to promote the sites and growth of tenants of DAS business.

Figure-13: China Tower's Number of Tower Sites Figure-14: China Tower's Number of Tenants for Tower Business '000 Number of tower sites(LHS) YoY Growth(RHS) '000 Number of tenants for tower business (LHS) YoY Growth(RHS) 2,300 9% 4,000 3,723 14% 2,215 7.7% 8% 2,200 3,500 3,324 12% 3,022 7% 10.1% 12.0% 3,000 2,837 10.0% 2,100 2,070 7.0% 2,645 10% 6% 1,990 2,500 2,000 5% 8% 6.5% 1,925 4.0% 2,000 4% 7.3% 1,900 1,855 3.4% 6%

1,500 3.7% 3% 1,800 4% 1,000

2%

Report

1,700 2% 1% 500

1,600 0% 0 0%

2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F Company

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 8 of 18 [Table_PageHeader]China Tower (00788 HK)

Figure-15: China Tower's Number of DAS Sites Figure-16: China Tower's Number of DAS Tenants

] 1 r a M t h g i R _ e l b a T [

'000 Number of DAS sites(LHS) YoY Growth(RHS) '000 Number of DAS tenants(LHS) YoY Growth(RHS) 60 80% 80 80% 73.1% 74.2 70.6% 53.4 70% 70 70% 50

60% 60 55.0 60% 44.0% 39.6 40 50% 50 50%

33.0 44.0 6 March2020 30 40% 40 40% 22.9 31.4 40.0% 35.0% 30% 30 25.0% 35.0% 30% 20 17.0 34.9% 23.6 33.0% 20.0% 20% 20 20% 10 10% 10 10%

0 0% 0 0% 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

In addition to the business with telecom operators, in order to fully utilize site resources, China Tower provides

multiple kinds of services to customers in various industries. TSSAI business mainly focus] 2 esr ona siteM t resourcesh g i R services,_ e l b a T [

data and information services, as well as field supervision & maintenance services. For example, to support the development of smart cities, the Company could offer site resources to install sensors, monitoring devices, charging piles, advertising screens, etc. Given the obvious trend of digital society, and China Tower's huge site resources, we expect TSSAI business to maintain rapid growth.

Figure-17: China Tower's Number of TSSAI Tenants '000 Number of TASSI tenants(LHS) YoY Growth(RHS)

450 759.2% 800% 403.9 400 700%

350

654.9% 310.7 600% (00788 HK)

300 500% 250 194.2 400%

200 中国铁塔 140.7 300% 150 200% 100

60.0% 30.0% 100%

50 18.6 38.0% China Tower 0 0% 2017A 2018A 2019F 2020F 2021F Source: the Company, Guotai Junan International.

Competitive Strengths

China Tower has the absolute leading position in the telecom tower infrastructure market. As at the end of 1H19, in terms of number of sites, China Tower accounted for more than 97% of market share in tower infrastructure service industry of China. China Tower has long-term agreements with major clients, and its major clients are its three major shareholders, therefore, the Company will keep having very stable relationships with its customers. Given the importance of scale effect to telecom tower providers, and the Company's stable relationship with customers, we expect China Tower's will continue to maintain its leading market position, and the competitive landscape will be stable.

Sharing will help China Tower to achieve stable revenue and profit growth. Site sharing is the core competitive strength of

the Company. The Company provides customers with discounts for site sharing to encourage them to share sites with others. Report Site sharing benefits both China Tower and customers: 1) telecom operators are able to have more base stations with lower

fees through site sharing. 2) By site sharing, China Tower is able to increase additional revenue without the need to construct

new towers, thus reduce capital expenditure and increase the marginal profit. 3) China Tower is able to carry out TSSAI Company business utilizing existing site resources.

See the last page for disclaimer Page 9 of 18 [Table_PageHeader]China Tower (00788 HK)

Development Strategies

] 1 r a M t h g i R _ e l b a T [

China Tower will continue to promote the "One Core and Two Wings" strategy, that is, taking tower business as core,

taking DAS business & innovative energy services as left wing, and taking TSSAI business & overseas expansion as right wing. The Company will make full use of existing resources, using existing resources to meet the demand of newly added tenants to improve the sharing rate continuously. On the other hand, China Tower will utilize social resources extensively, such as streetlight poles, surveillance poles, power towers, buildings, billboards, etc, to reduce construction costs effectively; and will promote tower sites to serve as social resources to expand income sources. 6 March2020

] 2 r a M t h g i R _ e l b a T [

(00788 HK)

中国铁塔 China Tower

Report

Company

See the last page for disclaimer Page 10 of 18 [Table_PageHeader]China Tower (00788 HK)

Financial Analysis

] 1 r a M t h g i R _ e l b a T [

Revenue Analysis

As the core business, tower business accounted for 94.0% of the Company's total revenue in 1-3QFY19. Tower business, DAS business, TSSAI business contributed 94.0%/ 3.4%/ 2.4%, respectively, to total revenue in 1-3QFY19. Although having accounted for a small proportion of the revenue, DAS business and TSSAI business both achieved explosive growth. The three telecom operators are the major customers of the Company; revenue from China Mobile, China Unicom and China 6 March2020 Telecom accounted for 52.9%/ 21.9%/ 23.3%, respectively in 1HFY19. Due to the rapid development of TSSAI business, revenue from other customers increased by 151.6% yoy, and its proportion to total revenue increased by 0.6 ppt YTD to 2.1% in 1HFY19.

Figure-18: China Tower's Revenue Breakdown by Figure-19: China Tower's Revenue Breakdown by Business Line Customer

Tower business DAS business TSSAI business China Mobile China Unicom China Telecom Others 0.0% 0.2% 1.7% 2.4% 100% 100% 0.0% 0.2% 1.5% 2.1% 0.8% 1.9% 2.5% 3.4% 90% 90% 21.9% 22.5% ] 2 r a 22.4%M t h g i R _ e l b a T [

23.3% 80% 80% 70% 70% 26.9% 23.6% 21.9% 21.7% 60% 60% 50% 50% 99.2% 97.7% 95.5% 94.0% 40% 40% 30% 30% 51.2% 53.6% 54.2% 52.9% 20% 20% 10% 10%

0% 0% 2016A 2017A 2018A 1-3Q19 2016A 2017A 2018A 1H19

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

(00788 HK)

We forecast revenue from tower business to increase from RMB68,597 million in FY18 to RMB79,537 million in FY21, at a CAGR of 5.1% in FY18-FY21. Revenue from tower business is mainly derived from tower leasing fee and service fee from telecom operators. Due to the rapid development of mobile internet as well as more and more 5G application scenarios, we 中国铁塔 expect mobile data consumption to keep increasing, which will raise the network utilization rate of the three telecom operators. The raise of network utilization rate brings demand for wireless base station expansion and upgrade, thus promoting the rise in

number of tenants and tower site sharing rate. The rising 4G and 5G penetration rate also provides growth drive for the number China Tower of tower tenants. Besides, due to the higher deployment frequency band, 5G base stations with the same power have a smaller coverage area than 4G base stations. In order to achieve the same coverage, more 5G base stations are needed than 4G. Therefore, 5G network construction will provide strong growth momentum for the Company in the future; given that the number of 5G base stations is expect to be higher than that of 4G. However, the 5G network "Co-build & Co-share" of telecom operators is likely to reduce the requirements for telecom base station construction of telecom operators. Besides, withdrawal of 2G/3G networks in the future is also expected to have certain negative impact on revenue growth of China Tower. We expect the number of tenants for tower business to increase to 3.723 million, at a CAGR of 9.5% in FY18-FY21. Taking the discount for tower site sharing into consideration, we forecast CAGR of revenue from tower business in FY18-FY21 to be 5.1%.

We forecast revenue from DAS business to increase from RMB1,819 million in FY18 to RMB4,867 million in FY21, at a CAGR of 38.8% in FY18-FY21. The number of DAS tenants increased by 24.2% YTD to 39,000 in 1H19. Many 5G applications will occur indoors, such as smart home, smart buildings, AR/VR, smart manufacturing, etc. However, the penetrating power of 5G signal with higher frequency band is lower than 4G signals, making it more difficult for signals to be

transmitted from outdoors to indoors. Distributed antenna systems is a way to solve this problem. Thus, we expect DAS Report business to grow rapidly in 5G construction.

Company

See the last page for disclaimer Page 11 of 18 [Table_PageHeader]China Tower (00788 HK)

Figure-20: China Tower's Revenue from Tower Business Figure-21: China Tower's Revenue from DAS Business

] 1 r a M t h g i R _ e l b a T [

Million Million Tower business revenue(LHS) YoY Growth(RHS) DAS business revenue(LHS) YoY Growth(RHS) 82,000 25% 6,000 250% 79,537

80,000 4,867 20.8% 205.0% 5,000 78,000 20% 200% 76,000 75,394 4,000 74,000 3,655 15% 150% 71,766 72,000 6 March2020 3,000 2,703 70,000 68,597 10% 100% 68,000 67,085 2,000 1,819 48.6% 66,000 4.6% 5.1% 1,284 41.7% 64,000 5% 35.2% 33.2% 50% 5.5% 1,000 62,000 2.3% 60,000 0% 0 0% 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

We forecast revenue from TSSAI business to increase from RMB1,222 million in FY18 to RMB4,787 million in FY21, at

a CAGR of 57.6% in FY18-FY21. Revenue from TSSAI business increased by 100.7% yoy to ] RMB2 r 1,355a M t millionh g i in R 1-3QFY_ e l 19.b a T [

Based on its huge site resources, the Company is able to provide customers from different industries with various types of services. The sharing of telecommunication tower sites in other fields will greatly save social resources; it brings additional revenue to China Tower as well as reduces the cost for its customers, thus brings a win-win effect to China Tower and its customers. The rapid development of big data, AI and internet of things (IoT) will reshape a large number of industries and companies, promoting the development of "informationization", which will provide a strong growth driver for the Company's TSSAI business.

We forecast total revenue to increase by 6.9%/ 7.5%/ 8.4% in FY19-FY21, respectively, based on our forecasts on tower business, DAS business and TSSAI business.

Figure-22: China Tower's Revenue from TSSAI Business Figure-23: China Tower's Total Revenue (00788 HK)

Million Million TSSAI business revenue(LHS) YoY Growth(RHS) Total revenue(LHS) YoY Growth(RHS)

6,000 900% 100,000 25% 中国铁塔 789.5% 89,489 800% 90,000 4,787 82,541 5,000 623.1% 22.6% 700% 80,000 76,759 20% 71,819 68,665 70,000 4,000 600%

3,221 60,000 15% China Tower 500% 3,000 50,000 400% 2,055 40,000 8.4% 10% 7.5% 2,000 300% 6.9% 30,000 1,222 200% 4.6% 20,000 5% 1,000 68.1% 56.8% 48.6% 100% 10,000 169 0 0% 0 0% 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Profit Analysis

We forecast operating profit margin to increase by 1.5 ppt/ 2.3 ppt/ 2.4 ppt to 14.1%/ 16.4%/ 18.8% in FY19-FY21, respectively. Due to the cost-effectiveness brought by tower site co-sharing, we expect growth of operating expense to be

lower than growth of revenue. We expect the co-sharing rate of the Company's tower sites to be elevated continuously, thus

Report enhancing the operating profit margin of the Company.

Company

See the last page for disclaimer Page 12 of 18 [Table_PageHeader]China Tower (00788 HK)

We forecast EPS to be RMB0.028/ RMB0.041/ RMB0.056 in FY19-FY21, respectively. We expect the tax rate to be

relatively stable. Based on our forecasts on revenue growth and expenses, we forecast shareholders'] 1 r a M t neth profitg i toR increase_ e l b by a T [

86.7%/ 44.2%/ 37.9% in FY19-FY21, respectively.

Figure-24: China Tower's Total Operating Expenses Figure-25: China Tower's Operating Profit

Million Million Operating Expense(LHS) YoY Growth(RHS) Operating Profit(LHS) YoY Growth(RHS) 74,000 25% 18,000 60%

72,685 16,804 6 March2020 72,000 16,000 50% 70,000 20% 69,033 14,000 51.8% 13,508 68,000 19.7% 12,000 40% 65,970 10,789 66,000 15% 10,000 9,081 64,000 30% 62,738 7,716 25.2% 24.4% 8,000 62,000 10% 60,949 18.8% 6,000 20% 60,000 5.3% 5.2% 4.6% 4,000 58,000 5% 17.7% 10% 56,000 2,000 2.9% 54,000 0% 0 0%

2017A 2018A 2019F 2020F 2021F 2017A 2018A ] 2019F2 r a M 2020Ft h g i 2021FR _ e l b a T [

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-26: China Tower's Profit Margins Figure-27: China Tower's Shareholders' Net Profit

Million EBITDA margin Operating margin Net magrin Shareholders' Net Profit(LHS) YoY Growth(RHS) 80% 12,000 2500% 72.3% 72.6% 72.9%

70% 10,000 9,841 2000% 58.8% 58.2% 2115.0%

60%

8,000 50% 7,138 1500%

40% 6,000

4,949 (00788 HK)

1000% 30% 4,000 14.1% 18.8% 20% 16.4% 2,650 11.2% 1,944 500% 2,000 中国铁塔 10% 12.6% 86.7% 37.9% 8.6% 11.0% 36.4% 44.2% 2.8% 6.4% 0% 3.7% 0 0% 2017A 2018A 2019F 2020F 2021F 2017A 2018A 2019F 2020F 2021F

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. China Tower

Report

Company

See the last page for disclaimer Page 13 of 18 [Table_PageHeader]China Tower (00788 HK)

Valuation & Investment Rating

] 1 r a M t h g i R _ e l b a T [

We initiate our coverage on China Tower with a Target Price of HK$2.18 and a rating of "Accumulate". China Tower is

expected to benefit from the massive construction of 5G networks, the profitability improvement from site co-sharing, and rapid expansion of TSSAI business in various industries. However, 5G network "Co-Build & Co-Share" is expected to reduce the need for new base stations. The EV/EBITDA ratio corresponding to our TP is 7.8x/ 7.1x/ 6.4x in FY19-FY21, respectively. Our DCF model suggests that China Tower's NAV should be HK$2.22 per share, implying that our TP has a 1.7% discount to the NAV. Key indicators and parameters used in the calculation are shown in the following table. 6 March2020

Table-2: DCF Valuation Table WACC Calculation DCF Calculation (RMB million) g = 2.5%

Risk-free rate 1.6% PV of FCFE 107,748

Market risk premium 9.3% PV of Terminal Value 332,331 Beta 1.12 Net (Debt)/Cash (91,032)

Cost of equity 12.0% NAV (HK$Mn) 390,424

NAV per share (HKD) 2.22

] 2 r a M t h g i R _ e l b a T [

Cost of debt 4.0% Sensitivity Analysis for NAV Perpetual Growth Rate

Effective tax rate 23.6% (HKD) 1.5% 2.0% 2.5% 3.0% 3.5%

After tax cost of debt 3.1% 7.5% 454,880 494,229 541,472 599,247 671,520

8.0% 410,925 443,444 481,890 528,049 584,500

8.5% 373,310 400,537 432,313 469,882 514,987

E/(E+D) 66.1% 9.0% 340,763 363,816 390,424 421,478 458,193

WACC 9.0% (%) WACC 9.5% 312,331 332,041 354,573 380,579 410,930

10.0% 287,286 304,282 323,548 345,572 370,992

(00788 HK)

Perpetual growth rate 2.5% 10.5% 265,062 279,827 296,442 315,276 336,806

Source: Guotai Junan International.

中国铁塔

China Tower

Report

Company

See the last page for disclaimer Page 14 of 18 [Table_PageHeader]China Tower (00788 HK)

Key Risks

] 1 r a M t h g i R _ e l b a T [

The Company’s businesses and financial performance may be affected by the ability and willingness of telecom

operators to maintain or increase capital expenditures in their mobile communications networks. As most of the Company’s revenue comes from the three telecom operators, if they plan to reduce CAPEX in mobile networks because of lower-than-expected data traffic consumption growth or other financial pressure, the growth of China Tower will be negatively affected. 6 March2020 The Company may face challenges in the development of its small cell and DAS business. Customers may choose to build their own small cell or DAS instead of outsourcing to China Tower. Meanwhile, the Company’s talent and technology reserve in small cell and DAS business are relatively limited compared with its macro cell business, which may hinder the Company's ability to develop 5G small cell and DAS business. The Company may also face challenges in site acquisition and maintenance.

Slower-than-expected 5G construction progress will have a negative impact on the Company's business performance. Given that 5G is a key driver for the Company's growth, slower-than-expected 5G construction progress will negatively affect the Company' revenue and profit growth.

] 2 r a M t h g i R _ e l b a T [

The Company is highly reliant on the three major telecom operators. In 1HFY19, 97.9% of the Company's total revenue was come from the three major telecom operators in China. The Company's bargaining power is limited as the three major telecom operators both being major customers and shareholders of the China Tower. Besides, the "Co-Build & Co-Sharing" of China Telecom and China Unicom may also reduce China Tower's bargaining power.

(00788 HK)

中国铁塔 China Tower

Report

Company

See the last page for disclaimer Page 15 of 18 [Table_PageHeader]China Tower (00788 HK)

Table-3: Peers Comparison

Market Cap PER PB] R 1 r a M ROEt (%)h g D/Yi (%)R _ e EV/EBITDAl b a T [

Company Ticker Currency Price (HKD Mil) 19F 20F 21F 19F 20F 21F 20F 20F 20F

HK Listed Companies China Tower Corp Ltd-H 788 HK HKD 1.970 341,456 57.9 40.2 30.8 1.7 1.6 1.6 4.0 1.3 7.4

China Mobile Ltd 941 HK HKD 62.500 1,254,123 10.8 10.7 10.5 1.0 1.0 0.9 9.5 5.0 2.8

China Unicom Hong Kong Ltd 762 HK HKD 6.280 189,402 14.4 11.8 10.0 0.5 0.5 0.5 4.7 3.3 1.7 6 March2020 China Telecom Corp Ltd-H 728 HK HKD 2.980 238,750 10.3 10.0 9.8 0.6 0.6 0.6 6.1 4.2 2.4

Zte Corp-H 763 HK HKD 32.550 244,300 25.1 23.1 18.8 3.9 3.3 2.8 15.3 1.1 24.5

Yangtze Optical Fibre And-H 6869 HK HKD 17.100 22,930 15.1 13.4 11.3 1.3 1.2 1.1 8.7 1.7 20.4

China Communications Servi-H 552 HK HKD 6.450 43,911 12.8 11.5 10.0 1.2 1.1 1.0 9.8 3.0 5.3

Simple Average 20.9 17.3 14.5 1.5 1.3 1.2 8.3 2.8 9.2 Weighted Average 19.5 16.4 14.2 1.4 1.2 1.2 8.6 3.8 5.8

US Listed Companies

American Tower Corp AMT US USD 246.940 850,121 57.8 54.4 47.9 21.6 25.7 43.2 41.6 1.8 23.1 Crown Castle Intl Corp CCI US USD 162.240 524,594 90.1 71.3 57.8 7.6 6.9 7.6 9.3 3.0 27.0

] 2 r a M t h g i R _ e l b a T [

Sba Communications Corp SBAC US USD 300.320 261,277 231.0 147.1 104.2 (9.2) (8.9) (8.5) (6.3) 0.6 25.6

Telesites Sab De Cv TSSLF US USD 0.750 19,237 n.a. n.a. n.a. n.a. n.a. n.a. 7.9 n.a. 11.4

Simple Average 126.3 90.9 70.0 6.7 7.9 14.1 13.1 1.8 21.8 Weighted Average 95.8 74.6 60.0 12.2 14.2 23.5 23.4 2.0 24.6

Other Markets Bharti Airtel Ltd BHARTI IN INR 526.900 302,462 562.6 n.a. 75.7 3.2 3.3 3.0 (13.3) 0.3 10.1 Cellnex Telecom Sa CLNX SM EUR 48.130 161,852 n.a. 173.8 135.6 3.4 5.9 5.7 9.6 0.2 25.2

Tower Bersama Infrastructure TBIG IJ IDR 1,110.000 13,729 28.3 25.3 21.2 6.5 6.3 5.6 25.9 2.6 12.0

Infrastrutture Wireless Ital INWTM S1 EUR 9.823 51,434 n.a. n.a. n.a. n.a. n.a. n.a. 9.2 n.a. 28.8

Sarana Menara Nusantara Pt TOWR IJ IDR 860.000 23,951 19.5 17.5 15.8 4.8 4.3 3.8 25.3 3.0 10.4 (00788 HK)

Simple Average 203.5 72.2 62.1 4.5 4.9 4.6 11.4 1.5 17.3 Weighted Average 502.8 144.8 90.7 3.4 4.3 4.0 (1.9) 0.4 16.3

中国铁塔 Overall Average 116.9 60.1 48.8 4.2 4.7 6.6 10.9 2.1 16.1 Overall Weighted Average 206.0 78.6 55.0 5.7 6.6 9.6 10.1 2.1 15.6 Source: Bloomberg.

China Tower

Report

Company

See the last page for disclaimer Page 16 of 18 [Table_PageHeader]China Tower (00788 HK)

Financial Statements and Ratios [Table_IncomeStatement] [Table_BalanceSheet]

Income Statement ] 1 Balancer a M Sheett h g i R _ e l b a T [

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Tower business 67,085 68,597 71,766 75,394 79,537 PP&E 258,138 249,055 242,381 237,171 232,926

DAS business 1,284 1,819 2,703 3,655 4,867 Construction in progress 10,930 12,193 14,321 17,421 21,621

TSSAI business 169 1,222 2,055 3,221 4,787 Right-of-use assets 0 0 36,246 36,971 37,710

Others 127 181 235 271 298 Long term prepayments 9,910 13,216 0 0 0

Total Revenue 68,665 71,819 76,759 82,541 89,489 Other non-current assets 13,148 9,101 8,968 9,864 10,851 6 March2020 Total Non-current Assets 292,126 283,565 301,915 301,428 303,108

D&A (32,642) (32,692) (44,708) (46,386) (48,469)

Site operating lease charges (11,336) (12,196) (1,192) (1,225) (1,266) Trade & other receivables 15,262 19,158 26,098 28,064 29,531 Repairs and maintenance (6,156) (6,165) (6,330) (6,482) (6,752) Cash & Cash Equivalents 7,852 4,836 3,674 4,962 7,663 Employee benefits and expenses (4,229) (4,917) (6,064) (6,686) (7,428) Other current assets 7,403 7,805 9,211 9,905 10,739

Other operating expenses (6,587) (6,768) (7,676) (8,254) (8,770) Total Current Assets 30,517 31,799 38,983 42,931 47,933 Total operating expenses (60,949) (62,738) (65,970) (69,033) (72,685) Total Assets 322,643 315,364 340,898 344,359 351,041

Operating Profit 7,716 9,081 10,789 13,508 16,804

Net Finance costs (5,179) (5,759) (4,480) (4,351) (4,127) Short term borrowings 95,260 79,946 77,548 73,670 69,987

Other gains 149 153 168 185 204 Lease liabilities 0 0 6,989 7,129 7,272

Deferred consideration payables 17,252 382 0 0 0

] 2 r a M t h g i R _ e l b a T [

Profit Before Tax 2,686 3,475 6,478 9,342 12,881 Accounts payable 31,906 30,591 30,676 32,100 33,798

Income Tax (742) (825) (1,529) (2,205) (3,040) Accrued expenses & other payables 5,400 3,263 3,958 3,452 3,271

Profit After Tax 1,944 2,650 4,949 7,138 9,841 Other current liabilities 223 577 606 636 668

Non-controlling Interest 0 0 0 0 0 Total Current Liabilities 150,041 114,759 119,777 116,987 114,996

Shareholders' Profit / Loss 1,944 2,650 4,949 7,138 9,841

Basic EPS 0.015 0.018 0.028 0.041 0.056 Long term borrowings 43,793 19,064 17,158 16,814 16,478

Lease liabilities 0 0 18,077 18,439 18,807 Other non-current liabilities 1,314 1,039 831 665 532

[Table_CashFlowStatement] Cash Flow Statement Total Non-current Liabilities 45,107 20,103 36,066 35,918 35,817

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Total Liabilities 195,148 134,862 155,843 152,905 150,813

Profit before tax 2,685 3,475 6,478 9,342 12,881

D&A 32,642 32,692 44,708 46,386 48,469 Share capital 129,345 176,008 176,008 176,008 176,008

Net finance costs 5,179 5,759 4,480 4,351 4,127 Reserves (1,850) 4,494 9,047 15,445 24,220 (00788 HK)

Other non-cash items 1,330 844 885 929 976 Total Shareholders' Equity 127,495 180,502 185,055 191,453 200,228

Working capital change (7,005) 2,987 (6,727) (2,497) (1,615) Minority Interest 0 0 0 0 0

Interest income received 104 248 169 129 174 Total Equity 127,495 180,502 185,055 191,453 200,228 中国铁塔 Tax paid 0 (465) (1,529) (2,205) (3,040)

Cash from Operating Activities 34,935 45,540 48,465 56,435 61,972 [Table_FinancialRatio] Financial Ratios

CAPEX (52,001) (32,995) (30,379) (35,109) (39,480) 2017A 2018A 2019F 2020F 2021F

Others 86 72 60 90 89 EBITDA margin (%) 58.8 58.2 72.3 72.6 72.9 China Tower

Cash from Investing Activities (51,915) (32,923) (30,319) (35,019) (39,391) Operating margin (%) 11.2 12.6 14.1 16.4 18.8

Net margin (%) 2.8 3.7 6.4 8.6 11.0

Change in borrowings 93,506 (40,359) (4,305) (4,221) (4,020) ROA (%) 0.6 0.8 1.5 2.1 2.8

Interest paid for interest-bearing liabilities (4,342) (8,832) (4,649) (4,479) (4,301) ROE (%) 1.5 1.7 2.7 3.8 5.0

Deferred consideration to acq tower asset (76,631) (16,884) (382) 0 0 Net gearing (%) 102.9 52.2 49.2 44.7 39.4

Payments of lease liabilities 0 0 (5,515) (5,625) (5,737)

Proceeds from issue of H shares 0 51,165 0 0 0

Others (4,950) (724) (4,458) (5,803) (5,822)

Cash from Financing Activities 7,583 (15,634) (19,308) (20,128) (19,879)

Net Changes in Cash (9,397) (3,017) (1,162) 1,289 2,701

Cash at Beg of Year 17,249 7,852 4,836 3,674 4,962

FX change 0 1 0 0 0

Cash at End of Year 7,852 4,836 3,674 4,962 7,663

Source: the Company, Guotai Junan International.

Report

Company [Table_CompanyRatingDefinition]

See the last page for disclaimer Page 17 of 18 [Table_PageHeader]China Tower (00788 HK)

Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; 6 March2020 or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [

or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),HAITIAN ANTENNA (08227 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research

Report within the preceding 12 months. (00788 HK) (5) Guotai Junan and its group companies are making, or will make a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research

Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. 中国铁塔

DISCLAIMER China Tower This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

© 2020 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved.

27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Report

Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 18 of 18