Incidents:
On March 19, 2024, China Unicom released its 2023 annual report. In 2023, the company achieved revenue of 372,597 billion yuan, a year-on-year increase of 4.97%, network communication business revenue of 244.58 billion yuan, a year-on-year increase of 3.1%, and NetSmart's business revenue of 75.28 billion yuan, an increase of 12.9% over the previous year; the company achieved net profit of 8.173 billion yuan, an increase of 11.96% over the previous year.
The stabilizing effect of the company's network communication business is outstanding.
In terms of mobile networking, the number of mobile users reached 333 million in 2023, with a net increase of 10.6 million users. The user structure continues to be optimized, and the 5G package user penetration rate has reached 78%; in terms of broadband networking, the company continues to build a reputation for gigabit services, with fixed broadband users reaching 113 million households, a net increase of 9.79 million over the previous year, and the net growth scale reached a record high of nearly ten years. In terms of information services, the number of paid users of personal digital smart living reached 99.23 million, and the number of Unicom Smart Home users reached 102.96 million.
The computing network digital intelligence business is improving, and innovation is transforming steadily and realistically
The company actively embraces the strategic opportunities brought by the new wave of digital revolution and simultaneous resonance. In 2023, Unicom's cloud business achieved revenue of 51 billion yuan in 2023, an increase of 41.6% over the previous year. In terms of data services, the company relies on centralized and technology-leading big data capabilities, and the data service industry share has exceeded 50% for 5 consecutive years. In terms of digital intelligence applications, the large-scale development of digital intelligence applications has achieved remarkable results. The total number of 5G industry application projects has reached 30,000, covering 71 major categories of the national economy, and serving more than 8,500 5G private network customers.
Implementing “investor-oriented”, investor returns are gradually improving.
China Unicom has always taken the investment value of listed companies as an important part of promoting high-quality development, and is committed to continuously improving shareholder returns. The total annual dividend was RMB 0.132 per share, up 21.1% year over year. The company's 2024 results guide annual capital expenditure of 65 billion yuan, and strives for double-digit growth in total profit. Capital expenditure is declining, profits are growing steadily, and investor returns are expected to gradually increase.
Profit Forecasts, Valuations, and Ratings
The company's network communication business is developing steadily, and computing network intelligence will continue to improve. We expect the company's revenue in 2024-2026 to be 4251.54/4421.35/472,564 billion yuan, respectively, with year-on-year growth rates of 14.11%/3.99%/6.88%, respectively, and net profit to mother of 93.07/105.36/11.370 billion yuan, respectively, with year-on-year growth rates of 13.88%/13.21%/7.91%, EPS 0.29/0.33/0.36 yuan/share, 3-year CAGR was 11.64%. In view of the company's insistence on embracing the digital industry and the steady development of its core business, we gave the company 20 times PE in 2024, with a target price of 5.8 yuan, and raised it to a “buy” rating.
Risk warning: Digital intelligence business development falls short of expectations, ARPU value increases less than expected, cost optimization falls short of expectations, etc.