We maintain the company's “buy” investment rating with a target price of HK$7.66. We expect the company's earnings per share for the 2024-2026 fiscal year to be RMB0.694/RMB0.761/RMB0.827, respectively. Due to the continued increase in dividend payout rates and potential growth opportunities in the data services sector, we maintained the company's “buy” investment rating and set the target price at HK$7.66.
Profits are growing steadily, and dividends are strong. China Unicom (the “Company”)'s service revenue and shareholders' net profit for 2023 were RMB335.2 billion (up 5.0% year on year) and RMB 18.7 billion (up 11.8% year on year), respectively, in line with market expectations. We believe that thanks to stable ARPU and the easing of depreciation pressure, we believe that the company's net profit will continue to grow steadily in the next few years, and it is expected that net profit will continue to grow by double digits in 2024. The 2023 dividend ratio increased 4.6 percentage points year over year to 54.4%. We expect the 2024 dividend rate to be around 60%, and the dividend payout ratio will rise further in 2025 and 2026.
Telecom operators naturally have the advantage of data sources. Telecom operators have the advantage of an end-to-end data industry chain, can achieve the security and control of the entire process, and can also provide data collection, transmission, storage, processing, analysis and various data services. The company's investment in computing power is expected to reach RMB 10 billion by 2024, as well as an additional flexible budget of RMB 10 billion. Due to operators' continuous investment in computing power, massive real-name data, controllable cybersecurity advantages, and state-owned enterprise backgrounds, we believe that telecom operators will benefit significantly from the development of the data element market.
The company will further lay out the data service market and is expected to benefit from the huge expandable space in the data service market.
In 2023, the company's data services business revenue reached RMB 5.3 billion, a rapid increase of 32% over the previous year. The company is the first telecom operator in China to implement intensive operations in data sets, and has accumulated extensive market experience in data valuation and data factorization. Based on the company's long-term layout in the field of data services and the advantages of a large number of high-quality data resources, we believe that after the construction of the data element market is gradually improved, the company can not only monetize a large amount of high-quality data, but also rely on rich experience to create a large number of data products and data services for vertical fields. As a result, the company will benefit from a broad market space for data elements.
Catalysts: Increase dividend payout rates; promote business related to commercial data.
Risk warning: Industrial Internet business is growing slower than expected; investment returns do not match.